Debt/Income Ratio

The debt to income ratio is a formula lenders use to calculate how much money can be used for your monthly home loan payment after all your other monthly debts have been met.

Understanding the qualifying ratio

Typically, 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) qualifying ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt together. Recurring debt includes payments on credit cards, car payments, child support, etcetera.

Some example data:

28/36 (Conventional)

• 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 want to run your own numbers, we offer a Mortgage Loan Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be thrilled 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. Call us at 4056158543.