# Debt Ratios for Home Lending

The debt to income ratio is a formula lenders use to calculate how much money can be used for a monthly mortgage payment after you have met your various other monthly debt payments.

Most conventional mortgage loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In 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 hazard insurance, HOA dues, PMI - everything that constitutes the full payment.

The second number in the ratio is what percent of your gross income every month which can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, and the like.

### Some example data:

28/36 (Conventional)

• Gross monthly income of \$6,500 x .28 = \$1,820 can be applied to housing
• Gross monthly income of \$6,500 x .36 = \$2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of \$6,500 x .29 = \$1,885 can be applied to housing
• Gross monthly income of \$6,500 x .41 = \$2,665 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Loan Qualification Calculator.

### Just Guidelines

Remember these ratios are only guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.

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