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 recurring debts.

About the qualifying ratio

In general, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (including principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt together. Recurring debt includes payments on credit cards, vehicle loans, child support, etcetera.

For example:

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, feel free to use our Mortgage Loan Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you determine how large a mortgage loan you can afford.

Executive Lending Group, LLC can answer questions about these ratios and many others. Give us a call at (816) 525-8000.

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