Debt Ratios for Home Lending

Your ratio of debt to income is a tool lenders use to determine how much of your income is available for your monthly home loan payment after you have met your other monthly debt payments.

About the qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything.

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

Some example data:

A 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Loan Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We will be thrilled to pre-qualify you to help you determine how large a mortgage you can afford.

MidTowne Mortgage can answer questions about these ratios and many others. Call us at (478) 746-2063.

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