Debt Ratios for Home Lending

The ratio of debt to income is a tool lenders use to calculate how much money can be used for your monthly home loan payment after all your other recurring debt obligations are fulfilled.

About the qualifying ratio

For the most part, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

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

The second number in the ratio is what percent of your gross income every month which can be applied to housing expenses and recurring debt. Recurring debt includes credit card payments, car loans, child support, and the like.

For example:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 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 very useful Loan Pre-Qualification Calculator.

Just Guidelines

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

At The Mortgage Exchange Service LLC, we answer questions about qualifying all the time. Call us at 703.255-5810.

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