Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts have been paid.

Understanding your qualifying ratio

Most conventional mortgages need 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 in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing costs (including mortgage principal and interest, PMI, hazard insurance, taxes, and homeowners' association dues).

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

Some example data:

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 want to run your own numbers, feel free to use our superb Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We'd be thrilled to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

Saab Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: 703-288-0777.

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