Debt Ratios for Home Lending

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Your debt to income ratio is a formula lenders use to determine how much money can be used for your monthly home loan payment after all your other monthly debt obligations are met.

About the qualifying ratio

Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 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 that makes up the payment.

The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. Recurring debt includes vehicle payments, child support and credit card payments.

Some example data:

28/36 (Conventional)

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, we offer a Loan Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford.

Johnson Mortgage Company LLC can walk you through the pitfalls of getting a mortgage. Give us a call at 757-873-1287.