Debt Ratios for Home Lending

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Your debt to income ratio is a formula lenders use to determine how much money is available for your monthly mortgage payment after all your other monthly debts are met.

How to figure the qualifying ratio

For the most part, conventional mortgage loans need 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 is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt together. Recurring debt includes vehicle loans, child support and monthly credit card payments.

Some example data:

A 28/36 ratio

• Gross monthly income of $3,500 x .28 = $980 can be applied to housing
• Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
• Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Pre-Qualifying Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.

Western Reliance Funding Group, Inc. can answer questions about these ratios and many others. Give us a call at 800.465.1404.1002.