Debt Ratios for Home Financing

Your ratio of debt to income is a tool lenders use to calculate how much of your income is available for your monthly home loan payment after you have met your various other monthly debt payments.

How to figure your qualifying ratio

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

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, auto payments, child support, and the like.

Examples:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 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 Loan Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be happy to pre-qualify you to determine how much you can afford.

Halpern & Associates Mortgage Corporation can walk you through the pitfalls of getting a mortgage. Call us at (305) 535-2230.

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