Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other monthly loans.

How to figure the qualifying ratio

Typically, underwriting for conventional mortgages requires 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 is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - 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 payments on credit cards, vehicle loans, child support, and the like.

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford.

At Longhorn Mortgage, we answer questions about qualifying all the time. Give us a call at 512-302-9410.

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