Debt Ratios for Home Lending

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Your ratio of debt to income is a formula lenders use to determine how much money is available for your monthly mortgage payment after you have met your various other monthly debt payments.

Understanding your qualifying ratio

In general, underwriting for conventional mortgage loans needs 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 your gross monthly income that can go to housing (this includes mortgage 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 can be spent on housing costs and recurring debt. Recurring debt includes credit card payments, auto payments, child support, and the like.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, please use this Loan Qualification Calculator.

Just Guidelines

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

At Acceptance Capital Mortgage Corporation - Roxy Redenbaugh NMLS#269926, we answer questions about qualifying all the time. Call us: 808.637.0011.

apital Mortgage Corporation - Roxy Redenbaugh NMLS#269926, we answer questions about qualifying all the time. Call us: 808.637.0011.

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