Debt Ratios for Home Financing

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

How to figure the qualifying ratio

For the most part, underwriting for conventional mortgage loans 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.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, vehicle loans, child support, etcetera.

For example:

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 calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan you can afford.

Yamini Patel can walk you through the pitfalls of getting a mortgage. Call us: (832) 730-2000.