Debt Ratios for Home Lending

Your debt to income ratio is a tool lenders use to determine how much of your income can be used for a monthly mortgage payment after all your other recurring debts are met.

About the qualifying ratio

For the most part, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (including principal and interest, PMI, homeowner's insurance, taxes, and HOA dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. Recurring debt includes things like vehicle loans, child support and monthly credit card payments.

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 want to calculate pre-qualification numbers with your own financial data, feel free to use our very useful Mortgage Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage loan you can afford.

At Capacity Lending, LLC, we answer questions about qualifying all the time. Give us a call: 469-640-0400.

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