Debt Ratios for Home Lending

Your debt to income ratio is a tool lenders use to determine how much of your income is available for a monthly home loan payment after all your other monthly debts have been fulfilled.

Understanding your qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing (this includes principal and interest, PMI, homeowner's insurance, taxes, and homeowners' association dues).

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 payments, child support and monthly credit card payments.

Some example data:

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 want to calculate pre-qualification numbers with your own financial data, use this Mortgage Loan Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We'd be thrilled to pre-qualify you to help you determine how much you can afford.

Longhorn Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 512-302-9410.

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