Debt Ratios for Home Financing

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

About your qualifying ratio

Typically, conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (including principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. Recurring debt includes auto/boat loans, child support and credit card payments.

For example:

28/36 (Conventional)

  • 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 want to run your own numbers, use this Mortgage Pre-Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We will be thrilled to pre-qualify you to help you determine how much you can afford.

Channel Mortgage LLC can answer questions about these ratios and many others. Give us a call at (718) 639-9500.

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