Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other monthly loans.

Understanding the qualifying ratio

Most conventional mortgages require 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.

In 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 homeowners' insurance, homeowners' dues, PMI - everything that constitutes the payment.

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

For example:

With a 28/36 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'd like to calculate pre-qualification numbers on your own income and expenses, please use this Loan Pre-Qualification Calculator.

Just Guidelines

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

1st Credential Mortgage Inc can answer questions about these ratios and many others. Give us a call at (281) 778-0805.

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