Debt Ratios for Home Lending

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

How to figure the qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

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, homeowners' dues, PMI - everything.

The second number in the ratio is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, auto loans, child support, and the like.

Examples:

28/36 (Conventional)

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'd like to run your own numbers, use this Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford.

Mortgage Headquarters of Missouri, Inc can walk you through the pitfalls of getting a mortgage. Call us at 5733029990.

Got a Question?

Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.