Debt Ratios for Home Lending

The ratio of debt to income is a formula lenders use to determine how much money is available for your monthly home loan payment after you have met your other monthly debt payments.


Understanding your qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (this includes principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

Some example data:

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, we offer a Loan Pre-Qualifying Calculator.

Don't forget these are only guidelines. We will be happy to pre-qualify you to help you figure out how much you can afford. At North Star Mortgage Realty, we answer questions about qualifying all the time. Call us at 408-402-5936. Ready to get started? Apply Now.

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