Debt Ratios for Home Financing

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


About the qualifying ratio

Most conventional mortgages need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

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 hazard insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto payments, child support, et cetera.

Examples:

With a 28/36 ratio

  • 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 run your own numbers, we offer a Mortgage Qualification Calculator.

Remember these ratios are only guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage you can afford. At Best Capital Funding, we answer questions about qualifying all the time. Give us a call at 909-358-4090. Want to get started? Apply Now.

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