Ratio of Debt to Income

The debt to income ratio is a tool lenders use to calculate how much of your income can be used for a monthly mortgage payment after all your other recurring debts are met.

Understanding your qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing (including loan principal and interest, PMI, hazard insurance, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, vehicle loans, child support, etcetera.

Some example data:

A 28/36 ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Pre-Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage you can afford.

At Custom Lending Group, we answer questions about qualifying all the time. Give us a call: 7072522700.

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