Debt Ratios for Home Financing

Your ratio of debt to income is a tool lenders use to calculate how much of your income is available for your monthly mortgage payment after you have met your various other monthly debt payments.

About the qualifying ratio

Typically, 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) ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be spent on housing costs (including mortgage principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt. Recurring debt includes payments on credit cards, vehicle loans, child support, etcetera.

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 want to run your own numbers, use this Mortgage Loan Pre-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 loan you can afford.

Abbey Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 352-369-4200.

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