Debt Ratios for Home Financing

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

How to figure the qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes things like vehicle loans, child support and credit card payments.

Some example data:

28/36 (Conventional)

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Pre-Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be happy to go over pre-qualification to determine how much you can afford.

At Firelight Mortgage Consultants, we answer questions about qualifying all the time. Give us a call: (303) 228-2254.

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