Debt Ratios for Home Lending

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

How to figure the qualifying ratio

In general, conventional mortgages need 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 be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt together. Recurring debt includes vehicle payments, child support and monthly credit card payments.

Examples:

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 want to run your own numbers, we offer a Mortgage Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford.

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