Debt Ratios for Residential Financing

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

How to figure your qualifying ratio

Usually, conventional loans need 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 gross monthly income that can go to housing (including mortgage principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that can be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, car loans, child support, etcetera.

Examples:

With a 28/36 ratio

  • 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 want to run your own numbers, feel free to use our superb Mortgage Loan Qualifying Calculator.

Guidelines Only

Remember these ratios are just guidelines. We will be happy to pre-qualify you to help you figure out how large a mortgage loan you can afford.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer questions about these ratios and many others. Give us a call at 2146635355.