Debt Ratios for Home Lending

Your debt to income ratio is a formula lenders use to calculate how much money is available for a monthly mortgage payment after all your other monthly debts have been met.

Understanding the qualifying ratio

For the most part, conventional mortgage loans need 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.

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, homeowners' dues, PMI - everything.

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, and the like.

For example:

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 superb Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We will 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 at 2037296681.

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185 Meadow St
Naugatuck, CT 06770