Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts have been paid.

About the qualifying ratio

Most conventional mortgages need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

The second number is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. Recurring debt includes things like car loans, child support and credit card payments.

Some example data:

With a 28/36 qualifying ratio

  • 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 with your own financial data, feel free to use our Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be happy to go over pre-qualification to determine how large a mortgage you can afford.

Coastal Mortgage Corp. can walk you through the pitfalls of getting a mortgage. Give us a call at 504-866-5626.

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