Debt Ratios for Home Lending

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for your monthly home loan payment after all your other monthly debts have been met.

Understanding your qualifying ratio

Usually, conventional mortgages 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 in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing (including principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes auto payments, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We will be thrilled to go over pre-qualification to determine how large a mortgage you can afford.

Macon Mortgage can walk you through the pitfalls of getting a mortgage. Call us at 478-474-4600.