Debt Ratios for Home Financing

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

How to figure your qualifying ratio

Usually, conventional mortgage loans need 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 how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. Recurring debt includes things like auto/boat payments, child support and credit card payments.

Some example data:

A 28/36 qualifying 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, we offer a Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

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

At Chris Caggiano - Grand Oaks Funding, LLC, we answer questions about qualifying all the time. Give us a call at (718) 477-4405.

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