Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts have been paid.

About the qualifying ratio

In general, conventional mortgages require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing (this includes principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing costs and recurring debt together. Recurring debt includes things like vehicle payments, child support and credit card payments.

Some example data:

28/36 (Conventional)

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We'd be thrilled to go over pre-qualification to help you figure out how much you can afford.

Custom Lending Group can walk you through the pitfalls of getting a mortgage. Call us: 7072522700.