Debt Ratios for Home Financing

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

How to figure the qualifying ratio

Most underwriting for conventional mortgages requires 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 your gross monthly income that can be spent on housing (including loan principal and interest, PMI, hazard insurance, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt. Recurring debt includes payments on credit cards, car payments, child support, etcetera.

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, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

Prime Capital Mortgage Corp can answer questions about these ratios and many others. Call us at 248-644-1200.

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