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.

How to figure your qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 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 costs (including loan principal and interest, private mortgage insurance, hazard 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 applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, etcetera.

Some example data:

28/36 (Conventional)

• 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 with your own financial data, use this Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We'd be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

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