Debt Ratios for Home Lending

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

Understanding your qualifying ratio

In general, underwriting for conventional mortgages requires 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 percentage of your gross monthly income that can go to housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property tax, and HOA dues).

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. For purposes of this ratio, debt includes credit card payments, auto loans, child support, etcetera.

Some example data:

A 28/36 ratio

  • 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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Loan Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford.

At Americn Hero Mortgage, we answer questions about qualifying all the time. Give us a call at 754-202-4376.

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