Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts have been paid.

How to figure your qualifying ratio

Usually, conventional mortgages need a qualifying ratio of 28/36. FHA loans are a little less strict, 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. 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 is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle loans, child support, and the like.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Qualification Calculator.

Just Guidelines

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

Firelight Mortgage Consultants can walk you through the pitfalls of getting a mortgage. Give us a call at (720) 550-4235.

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