Debt Ratios for Home Financing

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

Understanding your qualifying ratio

Typically, conventional loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, 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 the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt together. Recurring debt includes payments on credit cards, vehicle payments, child support, etcetera.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our Loan Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We will be thrilled to help you pre-qualify to help you figure out how large a mortgage you can afford.

Hawk Mortgage Group can walk you through the pitfalls of getting a mortgage. Give us a call at (443) 619-7900.

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