Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other monthly loans.

Understanding your qualifying ratio

Usually, conventional mortgage loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (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 applied to housing (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, property taxes, and HOA dues).

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt together. Recurring debt includes car loans, child support and monthly credit card payments.

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 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 Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We'd be thrilled to pre-qualify you to determine how much you can afford.

Not Your Average Lender can answer questions about these ratios and many others. Call us at 9722039033.

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Not Your Average Lender

NMLS# 230028

310 East I30 Suite B107
Garland, TX 75043