Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts are paid.

How to figure the qualifying ratio

Most conventional mortgages need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that makes up the payment.

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. Recurring debt includes things like auto/boat loans, child support and monthly credit card payments.

For example:

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 want to calculate pre-qualification numbers with your own financial data, use this Mortgage Loan Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be thrilled to go over pre-qualification to help you determine how much you can afford.

Price Mortgage Group LLC can answer questions about these ratios and many others. Call us: 405-513-7700.

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