Debt Ratios for Home Lending

The debt to income ratio is a formula lenders use to determine how much money can be used for your monthly home loan payment after you meet your various other monthly debt payments.

How to figure the qualifying ratio

Most conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little 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 be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

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

Examples:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our very useful Loan Qualification Calculator.

Guidelines Only

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

Prime Capital Mortgage Corp can walk you through the pitfalls of getting a mortgage. Call us: 248-644-1200.

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