Debt Ratios for Home Lending

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

About the qualifying ratio

Typically, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In 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, HOA dues, PMI - everything.

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto payments, child support, etcetera.

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'd like to calculate pre-qualification numbers with your own financial data, use this Mortgage Loan Qualification Calculator.

Guidelines Only

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

At Hayes Home Loans, we answer questions about qualifying all the time. Give us a call at 918-633-9916.

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