Debt Ratios for Home Lending

The debt to income ratio is a tool lenders use to calculate how much money can be used for your monthly home loan payment after all your other monthly debts are fulfilled.

About your qualifying ratio

Most underwriting for conventional mortgage loans needs 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 amount (as a percentage) of gross monthly income that can be spent on housing costs (including principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes payments on credit cards, auto payments, child support, etcetera.

For example:

A 28/36 ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, feel free to use our superb Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be happy to help you pre-qualify to help you determine how large a mortgage you can afford.

The Mortgage House can walk you through the pitfalls of getting a mortgage. Give us a call: 9037471800.

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