Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other monthly debts have been paid.

How to figure your qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing costs (including principal and interest, private mortgage insurance, hazard insurance, property tax, 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 vehicle loans, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • 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 calculate pre-qualification numbers with your own financial data, feel free to use our Mortgage Pre-Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage you can afford.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer questions about these ratios and many others. Give us a call: 214-663-5355.