Debt Ratios for Home Financing

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

How to figure your qualifying ratio

Typically, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are 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 go to housing (this includes loan principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto loans, child support, and the like.

For example:

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 want to run your own numbers, we offer a Mortgage Qualification Calculator.

Guidelines Only

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

Ward Kilduff Mortgage can walk you through the pitfalls of getting a mortgage. Call us: (860) 658-7100.

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