Debt Ratios for Home Financing

Your debt to income ratio is a tool lenders use to determine how much of your income can be used for your monthly home loan payment after all your other monthly debts have been met.

How to figure your qualifying ratio

Typically, conventional loans need 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 costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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 payments on credit cards, vehicle loans, child support, and the like.

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Mortgage Qualification Calculator.

Guidelines Only

Remember these ratios are just guidelines. We'd be thrilled to help you pre-qualify to help you determine how much you can afford.

Southwest Funding #841
Company NMLS # 303440 can answer questions about these ratios and many others. Call us at 5122916100.

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Southwest Funding #841
Company NMLS # 303440

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1016 La Posada Dr Ste 155-D
Austin, TX 78752