Debt Ratios for Home Financing

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The debt to income ratio is a tool lenders use to determine how much money can be used for your monthly home loan payment after all your other recurring debts have been fulfilled.

About your qualifying ratio

Typically, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 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 is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

For example:

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'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Pre-Qualification Calculator.

Don't forget these ratios are just guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford. Bonnie Andrews can answer questions about these ratios and many others. Give us a call: 901-674-8593.

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