Debt Ratios for Residential Financing

Your ratio of debt to income is a formula lenders use to calculate how much of your income can be used for your monthly home loan payment after all your other recurring debt obligations are met.

About your qualifying ratio

For the most part, conventional 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 go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

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 things like car payments, child support and monthly credit card payments.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, feel free to use our superb Mortgage Pre-Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We will be thrilled to help you pre-qualify to help you determine how much you can afford.

At America's Money Source, we answer questions about qualifying all the time. Give us a call: 4078987559.


America's Money Source

2306 Curry Ford Rd
Orlando, FL 32806