Debt Ratios for Home Lending

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

About your qualifying ratio

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

The first number is how much (by percent) 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, PMI - everything.

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt. Recurring debt includes things like auto/boat loans, child support and credit card payments.

Some example data:

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, please use this Mortgage Qualifying Calculator.