Debt Ratios for Home Lending

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for your monthly mortgage payment after all your other recurring debts have been fulfilled.

Understanding the qualifying ratio

Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt. Recurring debt includes vehicle loans, child support and credit card payments.

Examples:

With a 28/36 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'd like to run your own numbers, we offer a Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be happy to pre-qualify you to determine how large a mortgage loan you can afford.

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

Quick and Easy Pre-Qualication

Fill out the form below, it will take you 2 minutes, for a quick and easy mortgage pre-qualification. I will examine your information for qualified mortgage programs, down payment assistance, and more! You will have answers to you questions plus I will email you an individualized assessment based on the information you provided. I will personally work on this assessment for you, please allow me 1 to 2 business days to complete and respond.

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