Debt Ratios for Home Lending

Your debt to income ratio is a formula lenders use to calculate how much of your income can be used for a monthly home loan payment after all your other monthly debts are fulfilled.

About your qualifying ratio

Usually, underwriting for conventional mortgage loans needs 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.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything.

The second number in the ratio is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes vehicle payments, child support and monthly credit card payments.

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 on your own income and expenses, please use this Mortgage Qualifying Calculator.

Just Guidelines

Don't forget these are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage you can afford.

Alternative Mortgage Group can walk you through the pitfalls of getting a mortgage. Give us a call: 561-395-4264.


Alternative Mortgage Group

80 SW 14 Ave
Boca Raton, FL 33486