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Debt Ratios for Home Financing

The ratio of debt to income is a tool lenders use to calculate how much money is available for a monthly mortgage payment after all your other recurring debts are fulfilled.

About your qualifying ratio

In general, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

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

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Loan Pre-Qualifying Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We'd be thrilled to pre-qualify you to determine how large a mortgage loan you can afford.

Greystone Loans, Inc. can answer questions about these ratios and many others. Give us a call: (909) 467-1090.

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