Debt Ratios for Home Financing

The debt to income ratio is a formula lenders use to calculate how much of your income is available for your monthly mortgage payment after you meet your various other monthly debt payments.

About the qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing (including mortgage principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

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 payments on credit cards, vehicle payments, child support, and the like.

Some example data:

With a 28/36 ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Mortgage Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We will be happy to go over pre-qualification to help you determine how much you can afford.

Statewide Funding can walk you through the pitfalls of getting a mortgage. Call us: (415) 456-7802.

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