Debt Ratios for Home Financing

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


Understanding the qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing (including mortgage principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing costs and recurring debt together. Recurring debt includes auto loans, child support and credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses


If you want to run your own numbers, we offer a Mortgage Loan Pre-Qualifying Calculator.

Remember these are just guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford. Metro Mortgage Lending can walk you through the pitfalls of getting a mortgage. Give us a call: 502-491-0749. Want to get started? Apply Online Now.

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