Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts have been paid.

About your qualifying ratio

In general, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

The second number in the ratio is what percent of your gross income every month that should be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat payments, child support, and the like.

Examples:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

At The Mortgage Exchange Service LLC, we answer questions about qualifying all the time. Call us at 7032555810.

Basic Pre-Approval

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