Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other monthly debts.

About your qualifying ratio

Usually, conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be spent on housing (including principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto loans, child support, etcetera.

Examples:

28/36 (Conventional)

  • 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 run your own numbers, please use this Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to pre-qualify you to help you determine how large a mortgage loan you can afford.

Americn Hero Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: 754-202-4376.

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