Debt Ratios for Home Financing

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

About the qualifying ratio

In general, conventional mortgages need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing costs (this includes mortgage principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

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

For example:

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 very useful Mortgage Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We will be happy to pre-qualify you to determine how large a mortgage you can afford.

Milestone Mortgage dba TMC can walk you through the pitfalls of getting a mortgage. Give us a call: (303) 877-0415.

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