Debt Ratios for Home Lending

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The ratio of debt to income is a tool lenders use to determine how much money can be used for your monthly mortgage payment after all your other recurring debt obligations are fulfilled.

Understanding your qualifying ratio

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

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 that constitutes the payment.

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 credit card payments, auto/boat payments, child support, and the like.

For example:

With a 28/36 ratio

• 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'd like to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Qualification Calculator.

Just Guidelines

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

At Nova Home Loans, we answer questions about qualifying all the time. Call us: 720-279-5932.