Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts are paid.

Understanding your qualifying ratio

Usually, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing costs (this includes principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto payments, child support, etcetera.

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

Just Guidelines

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

At Pacific Loan Brokers, we answer questions about qualifying all the time. Call us at 877-310-6200.

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