Debt Ratios for Home Lending

The debt to income ratio is a tool lenders use to calculate how much of your income is available for your monthly home loan payment after you meet your various other monthly debt payments.

How to figure your 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) ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything that makes up the payment.

The second number in the ratio is what percent of your gross income every month that should be spent on housing expenses and recurring debt. Recurring debt includes auto payments, child support and credit card payments.

Some example data:

With a 28/36 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 run your own numbers, use this Loan Qualifying Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be thrilled to help you pre-qualify to help you determine how much you can afford.

Forum Mortgage Bancorp can answer questions about these ratios and many others. Call us at (773) 774-9040 Ext 121.

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