Debt Ratios for Home Financing

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

How to figure your qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the full payment.

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

Examples:

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'd like to run your own numbers, use this Mortgage Loan Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We will be happy to pre-qualify you to help you figure out how much you can afford.

Affirm Home Loans can walk you through the pitfalls of getting a mortgage. Give us a call at (972) 292-0448.

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