Debt Ratios for Home Lending

The ratio of debt to income is a formula lenders use to calculate how much of your income can be used for a monthly home loan payment after all your other recurring debts have been met.

Understanding your qualifying ratio

In general, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (including principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, car loans, child support, and the like.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be happy to pre-qualify you to determine how large a mortgage loan you can afford.

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

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