Debt Ratios for Home Financing

The ratio of debt to income is a formula lenders use to determine how much money can be used for your monthly home loan payment after you have met your various other monthly debt payments.

About the qualifying ratio

Most underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that makes up the payment.

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

Some example data:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, use this Mortgage Pre-Qualification Calculator.

Just Guidelines

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

Harbor View Lending* a DBA of Megastar Financial can answer questions about these ratios and many others. Give us a call at (207) 571-8034.