Debt Ratios for Home Lending

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

How to figure the qualifying ratio

Most conventional mortgage loans require 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 your gross monthly income that can be spent on housing (including principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle payments, child support, and the like.

Examples:

A 28/36 qualifying ratio

• Gross monthly income of $2,700 x .28 = $756 can be applied to housing
• Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $2,700 x .29 = $783 can be applied to housing
• Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be happy to go over pre-qualification to help you figure out how large a mortgage you can afford.

Reliance Mortgage Service, Inc can answer questions about these ratios and many others. Give us a call at 562 320-0510.