Debt Ratios for Home Lending

The ratio of debt to income is a tool lenders use to determine how much of your income is available for your monthly home loan payment after you have met your other monthly debt payments.

About your qualifying ratio

Usually, conventional mortgage loans need 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 applied to housing costs (including loan principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt together. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

Examples:

A 28/36 qualifying 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 want to run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We'd be thrilled to help you pre-qualify to help you determine how much you can afford.

At Savers Home Loans, we answer questions about qualifying all the time. Call us: (800) 974-0509.