Debt-to-Income Ratio

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts are paid.

About the qualifying ratio

Usually, conventional loans need 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 your gross monthly income that can be spent on housing (including principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

Some example data:

With a 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, please use this Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We'd be happy to pre-qualify you to help you determine how large a mortgage you can afford.

Executive Lending Group can walk you through the pitfalls of getting a mortgage. Give us a call at 4056158543.

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Executive Lending Group

A Division of 1st Capital Mortgage LLC

2401 Tee Circle, STE 102B
Norman, OK 73069