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 are paid.
How to figure your qualifying ratio
Typically, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.
For these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything.
The second number in the ratio is what percent of your gross income every month that should be spent on housing costs and recurring debt together. Recurring debt includes vehicle loans, child support and credit card payments.
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 run your own numbers, feel free to use our very useful Loan Qualification Calculator.
Guidelines Only
Remember these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you determine how much you can afford.
Metro Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 866-300-1550.