Debt Ratios for Home Lending

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

About the qualifying ratio

In general, underwriting for conventional loans needs 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 amount (as a percentage) of gross monthly income that can go to housing costs (this includes principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

The second number is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat payments, 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 Qualification Calculator.

Just Guidelines

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

Nationwide Home Loans can answer questions about these ratios and many others. Call us at 5626935048.

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Nationwide Home Loans

NMLS #238531| CA BRE #01017101

16211 Whittier Blvd.
Whittier, CA 90603