Debt Ratios for Home Lending

The ratio of debt to income is a tool lenders use to calculate how much of your income is available for your monthly mortgage payment after all your other monthly debts are fulfilled.


How to figure your qualifying ratio

In general, underwriting for conventional mortgage loans reccomend a qualifying ratio of 28/36. FHA loans are less strict, requiring a 31/43 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (this includes loan principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

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

For example:

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 31/43 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .31 = $837 can be applied to housing
  • Gross monthly income of $2,700 x .43 = $1,161 can be applied to recurring debt plus housing expenses

Many times, with compensating factors, the allowable debt ratios can be higher.

If you'd like to calculate pre-qualification numbers with your own financial data, I offer a Mortgage Qualification Calculator.

Remember these ratios are just guidelines. I will be happy to pre-qualify you to help you determine how much you can afford. Precision Mortgage, Inc. can walk you through the pitfalls of getting a mortgage. Give me a call at 623-202-3142. Want to get started? Apply Now.

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