Debt Ratios for Home Lending

Your ratio of debt to income is a tool lenders use to calculate how much money is available for a monthly mortgage payment after you have met your other monthly debt payments.

How to figure the qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the payment.

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

For example:

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 want to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Pre-Qualifying Calculator.

Guidelines Only

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

At Amity Mortgage LLC, we answer questions about qualifying all the time. Call us at (203) 729-6681.

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