Debt Ratios for Home Financing
Your debt to income ratio is a tool lenders use to determine how much money is available for your monthly home loan payment after all your other monthly debt obligations have been met.
How to figure the qualifying ratio
Most conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little 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 go to housing (including principal and interest, PMI, hazard insurance, property tax, and HOA dues).
The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, vehicle loans, child support, and the like.
Examples:
With a 28/36 qualifying ratio
- 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, feel free to use our very useful Loan Qualifying Calculator.
Just Guidelines
Don't forget these ratios are only guidelines. We'd be happy to go over pre-qualification to help you figure out how much you can afford.
At U.S.A. Lending, Inc., we answer questions about qualifying all the time. Give us a call at 305-967-7200.