Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts have been paid.

Understanding the qualifying ratio

Most conventional loans require 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 is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, car payments, child support, etcetera.

For example:

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 want to run your own numbers, use this Mortgage Qualifying Calculator.

Just Guidelines

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

Statewide Funding can answer questions about these ratios and many others. Give us a call: (415) 456-7802.

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