Debt Ratios for Home Lending

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

About your qualifying ratio

Typically, conventional loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt. Recurring debt includes auto/boat payments, child support and credit card payments.

For example:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be happy to help you pre-qualify to help you figure out how much you can afford.

Americn Hero Mortgage can answer questions about these ratios and many others. Call us at 754-202-4376.

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