Debt Ratios for Home Financing

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

Understanding your qualifying ratio

Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, 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, HOA dues, Private Mortgage Insurance - everything.

The second number in the ratio is what percent of your gross income every month which can be applied to housing expenses and recurring debt together. Recurring debt includes things like car payments, child support and credit card payments.

Examples:

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'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Pre-Qualification Calculator.

Guidelines Only

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

At America's Money Source, we answer questions about qualifying all the time. Call us at (407) 898-7559.

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