Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other recurring loans.

How to figure your qualifying ratio

In general, conventional mortgages need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything that makes up the full payment.

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

Examples:

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 on your own income and expenses, feel free to use our superb Mortgage Pre-Qualifying Calculator.

Guidelines Only

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

Mario Vega can answer questions about these ratios and many others. Call us: 877-310-6200.

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