Debt Ratios for Home Financing

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

Understanding your qualifying ratio

In general, conventional loans need a qualifying ratio of 28/36. FHA loans are less strict, 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, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. Recurring debt includes car payments, child support and credit card payments.

For example:

28/36 (Conventional)

• 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 calculate pre-qualification numbers with your own financial data, use this Mortgage Qualification Calculator.

Just Guidelines

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

Firelight Mortgage Consultants can walk you through the pitfalls of getting a mortgage. Call us: 3032282254.