Debt Ratios for Home Lending

Your debt to income ratio is a tool lenders use to determine how much of your income is available for your monthly mortgage payment after all your other monthly debt obligations are fulfilled.

Understanding your qualifying ratio

In general, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto/boat loans, child support, and the like.

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'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage you can afford.

Amity Mortgage LLC can answer questions about these ratios and many others. Call us: (203) 729-6681.

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