Debt Ratios for Home Financing

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

How to figure your qualifying ratio

Most 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 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 homeowners' insurance, HOA dues, PMI - everything.

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt together. Recurring debt includes things like vehicle payments, child support and credit card payments.

For example:

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 with your own financial data, use this Loan Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be thrilled to go over pre-qualification to help you determine how large a mortgage you can afford.

At Firelight Mortgage Consultants, we answer questions about qualifying all the time. Call us at 3032282254.