Debt Ratios for Home Financing

Your ratio of debt to income is a tool lenders use to calculate how much of your income can be used for your monthly mortgage payment after you meet your various other monthly debt payments.

About the qualifying ratio

For the most part, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes car payments, child support and credit card payments.

For example:

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'd like to calculate pre-qualification numbers with your own financial data, we offer a Loan Pre-Qualification Calculator.

Guidelines Only

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

The Lending Source can walk you through the pitfalls of getting a mortgage. Give us a call: (973) 601-2122.

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