Debt Ratios for Home Financing

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

About the qualifying ratio

In general, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing costs (this includes mortgage principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing costs and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

Examples:

A 28/36 qualifying ratio

  • 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'd like to run your own numbers, we offer a Loan Qualification Calculator.

Just Guidelines

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

At Custom Lending Group, we answer questions about qualifying all the time. Call us: (707) 252-2700.

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