Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other recurring debts.

About the qualifying ratio

Most underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that constitutes the payment.

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. Recurring debt includes things like vehicle loans, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Loan Pre-Qualifying Calculator.

Just Guidelines

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

Foxfield Financial can answer questions about these ratios and many others. Give us a call at 720-598-8300.

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