Debt Ratios for Home Financing

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

About the qualifying ratio

Typically, underwriting for conventional mortgage loans requires 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 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, HOA dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes things like auto payments, child support and monthly credit card payments.

Examples:

A 28/36 qualifying ratio

  • 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'd like to run your own numbers, please use this Mortgage Qualifying Calculator.

Just Guidelines

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

Capacity Lending, LLC can walk you through the pitfalls of getting a mortgage. Call us: 469-640-0400.

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