Debt Ratios for Home Financing

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

About your qualifying ratio

Most conventional loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

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

For example:

With a 28/36 qualifying ratio

• Gross monthly income of $3,500 x .28 = $980 can be applied to housing
• Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
• Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, please use this Loan Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We will be happy to help you pre-qualify to determine how large a mortgage you can afford.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can walk you through the pitfalls of getting a mortgage. Give us a call: 2146635355.