Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other monthly loans.

About the qualifying ratio

Usually, conventional loans require 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.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (including loan principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

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, vehicle loans, child support, and the like.

Some example data:

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 want to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford.

Nationwide Home Loans can answer questions about these ratios and many others. Call us at (562) 693-5048.

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