Debt Ratios for Home Lending

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

About your qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (this includes principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes payments on credit cards, car payments, child support, and the like.

Some example data:

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 want to run your own numbers, we offer a Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford.

At Real Property Finance, we answer questions about qualifying all the time. Call us: 310-379-5997.

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