Debt Ratios for Home Lending

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

How to figure your qualifying ratio

Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing (this includes loan principal and interest, PMI, homeowner's insurance, property taxes, and homeowners' association dues).

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 together. Recurring debt includes payments on credit cards, vehicle payments, child support, and the like.

For example:

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

Guidelines Only

Don't forget these are only guidelines. We'd be thrilled to pre-qualify you to determine how much you can afford.

At Bob Rutledge Mortgage, we answer questions about qualifying all the time. Give us a call at 3149139678.