Debt Ratios for Home Lending

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

Understanding the qualifying ratio

Most conventional mortgages 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 percentage of gross monthly income that can go to housing (including principal and interest, PMI, homeowner's insurance, property taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes auto/boat loans, child support and monthly credit card payments.

Examples:

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 run your own numbers, feel free to use our superb Loan Pre-Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to go over pre-qualification to help you figure out how much you can afford.

Executive Lending Group can walk you through the pitfalls of getting a mortgage. Call us: 4056158543.

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Executive Lending Group

A Division of 1st Capital Mortgage LLC

2401 Tee Circle, STE 102B
Norman, OK 73069