Debt Ratios for Home Financing

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

Understanding the qualifying ratio

Most conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little 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 (including mortgage principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto loans, child support, and the like.

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'd like to run your own numbers, feel free to use our Mortgage Loan Qualifying Calculator.

Guidelines Only

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

At 1st Credential Mortgage Inc, we answer questions about qualifying all the time. Call us at (281) 778-0805.

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