Debt Ratios for Home Lending

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

About your qualifying ratio

In general, conventional mortgage loans require 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, PMI - everything that makes up the payment.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt together. Recurring debt includes auto payments, child support and credit card payments.

Examples:

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 run your own numbers, use this Loan Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be thrilled to go over pre-qualification to determine how large a mortgage you can afford.

Family Mortgage Company of Hawaii, Inc. NMLS #244497 can answer questions about these ratios and many others. Give us a call: (808) 935-0678.

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