Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other recurring loans.

Understanding the qualifying ratio

In general, conventional mortgages require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt. Recurring debt includes car loans, child support and credit card payments.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, use this Loan Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We will be happy to help you pre-qualify to help you figure out how large a mortgage you can afford.

At Universal Lending Services, Inc., we answer questions about qualifying all the time. Give us a call at (337) 264-9990.

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