Debt Ratios for Home Financing

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

About your qualifying ratio

In general, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, car loans, child support, et cetera.

Some example data:

With 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 run your own numbers, feel free to use our Loan Qualifying Calculator.

Remember these ratios are just guidelines. We'd be happy to go over pre-qualification to determine how much you can afford. Primary Residential Mortgage, Inc. can walk you through the pitfalls of getting a mortgage. Call us: (214) 736-9466.