Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other monthly loans.

About the qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (including loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, and the like.

Some example data:

28/36 (Conventional)

  • 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'd like to run your own numbers, we offer a Mortgage Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be thrilled to go over pre-qualification to help you determine how large a mortgage you can afford.

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

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