Debt Ratios for Home Financing

Your debt to income ratio is a formula lenders use to calculate how much of your income can be used for your monthly mortgage payment after all your other recurring debt obligations are fulfilled.


About your qualifying ratio

Most conventional mortgages 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 in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing costs (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. Recurring debt includes things like auto loans, child support and credit card payments.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses


If you'd like to run your own numbers, feel free to use our very useful Mortgage Qualifying Calculator.

Don't forget these are just guidelines. We'd be happy to go over pre-qualification to help you determine how much you can afford. Diamond Mortgage Lending can answer questions about these ratios and many others. Call us at 888-365-2023. Ready to begin? Apply Here.

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