Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you have paid your other monthly loans.

How to figure the qualifying ratio

Most conventional mortgage loans 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 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 homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, auto/boat payments, child support, etcetera.

Examples:

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 want to run your own numbers, please use this Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We will be happy to pre-qualify you to help you figure out how large a mortgage loan you can afford.

New Millennium Mortgage Co. NMLS: 331173 can answer questions about these ratios and many others. Call us at (941) 366-5800.

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