Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you have paid your other monthly loans.

How to figure the qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt. Recurring debt includes credit card payments, car payments, child support, and the like.

Examples:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Loan Qualification Calculator.

Just Guidelines

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

U.S.A. Lending, Inc. can answer questions about these ratios and many others. Call us at 305-967-7200.