Debt Ratios for Home Lending

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

Understanding your qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be applied to housing costs (including loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt. Recurring debt includes car loans, child support and credit card payments.

Examples:

28/36 (Conventional)

  • 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 run your own numbers, feel free to use our Loan Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

At MidTowne Mortgage, we answer questions about qualifying all the time. Give us a call: (478) 746-2063.

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