Debt Ratios for Home Lending

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


About your qualifying ratio

For the most part, underwriting for conventional mortgages requires 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 is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto loans, child support, et cetera.

Examples:

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 on your own income and expenses, we offer a Loan Pre-Qualifying Calculator.

Don't forget these ratios are only guidelines. We'd be thrilled to help you pre-qualify to determine how much you can afford. Agape Mortgages Inc can walk you through the pitfalls of getting a mortgage. Give us a call at 503-253-3299. Want to get started? Apply Now.

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