Debt Ratios for Home Lending

The debt to income ratio is a formula lenders use to determine how much money can be used for your monthly mortgage payment after you meet your other monthly debt payments.

About your qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes auto payments, child support and credit card payments.

Examples:

A 28/36 qualifying ratio

  • 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 on your own income and expenses, we offer a Mortgage Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be happy to go over pre-qualification to help you determine how large a mortgage you can afford.

Valley Savers Mortgage, LLC can answer questions about these ratios and many others. Give us a call at (602) 332-9544.

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