# Debt Ratios for Home Lending

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

### Understanding your qualifying ratio

For the most part, underwriting for conventional loans needs 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 gross monthly income that can be applied to housing (including principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

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

### For example:

28/36 (Conventional)

• Gross monthly income of \$4,500 x .28 = \$1,260 can be applied to housing
• Gross monthly income of \$4,500 x .36 = \$1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of \$4,500 x .29 = \$1,305 can be applied to housing
• Gross monthly income of \$4,500 x .41 = \$1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, we offer a Loan Pre-Qualifying Calculator.

### Just Guidelines

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

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