Debt Ratios for Home Lending

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

Understanding your qualifying ratio

For the most part, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the full payment.

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

For example:

A 28/36 qualifying 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 run your own numbers, feel free to use our Loan Pre-Qualification Calculator.

Guidelines Only

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

1st Credential Mortgage Inc can answer questions about these ratios and many others. Give us a call: (281) 778-0805.

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