Debt Ratios for Home Lending

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

Understanding the qualifying ratio

For the most part, 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 amount (as a percentage) of your gross monthly income that can be spent on housing costs (this includes loan principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes credit card payments, auto/boat loans, child support, and the like.

Some example data:

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 calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to go over pre-qualification to help you determine how large a mortgage you can afford.

Northeast Bancorp of America, Inc. can answer questions about these ratios and many others. Call us: (440) 234-9660.

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