Debt Ratios for Home Lending

The debt to income ratio is a formula lenders use to calculate how much of your income can be used for your monthly home loan payment after you have met your other monthly debt payments.

About your qualifying ratio

Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt together. Recurring debt includes things like car loans, child support and monthly credit card payments.

For example:

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 run your own numbers, feel free to use our superb Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you determine how much you can afford.

1st Credential Mortgage Inc can walk you through the pitfalls of getting a mortgage. Call us: (281) 778-0805.

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