Debt-to-Income Ratio

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

How to figure 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.

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

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

Examples:

With 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 Loan Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford.

Executive Lending Group can answer questions about these ratios and many others. Give us a call at 4056158543.