Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts have been paid.

Understanding your qualifying ratio

For the most part, conventional mortgages require a qualifying ratio of 28/36. FHA loans are less strict, 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, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

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

Examples:

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 calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be thrilled to pre-qualify you to help you determine how much you can afford.

Statewide Funding can answer questions about these ratios and many others. Call us at (415) 456-7802.

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