Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after your other recurring debts are paid.

About your qualifying ratio

Typically, underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying 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 hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes credit card payments, vehicle loans, child support, and the like.

Examples:

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 run your own numbers, we offer a Loan Qualification Calculator.

Just Guidelines

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

At Colorado Mortgage Company, we answer questions about qualifying all the time. Give us a call: 719-357-6601.

Basic Pre-Approval

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