Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts have been paid.

How to figure the qualifying ratio

Most conventional loans 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.

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 (including loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. Recurring debt includes things like auto/boat loans, child support and credit card payments.

Examples:

With a 28/36 ratio

  • 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, we offer a Mortgage Pre-Qualifying Calculator.

Just Guidelines

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

At Crown Mortgage, we answer questions about qualifying all the time. Call us: (434) 975-5626.

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