Debt Ratios for Home Financing

Your ratio of debt to income is a tool lenders use to determine how much of your income can be used for a monthly home loan payment after you have met your other monthly debt payments.

About your qualifying ratio

Usually, 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 how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the payment.

The second number in the ratio is what percent of your gross income every month that should be applied to housing costs and recurring debt together. Recurring debt includes credit card payments, auto loans, child support, and the like.

Examples:

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, we offer a Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be happy to pre-qualify you to help you determine how much you can afford.

First Southeast Mortgage Corporation can answer questions about these ratios and many others. Call us at 954.920.9799.

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