Debt Ratios for Home Financing

Your ratio of debt to income is a formula lenders use to calculate how much money can be used for a monthly home loan payment after you have met your other monthly debt payments.


About the qualifying ratio

Typically, underwriting for conventional 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.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.

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 things like auto/boat loans, child support and credit card payments.

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Qualification Calculator.

Remember these ratios are just guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage you can afford. At Community Mortgage, LLC (NMLS: #224143), we answer questions about qualifying all the time. Give us a call at (816) 916-7723. Ready to begin? Apply Online Now.

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