Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you've paid your other monthly loans.

About your qualifying ratio

Most 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.

For these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the payment.

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt together. Recurring debt includes things like auto loans, child support and credit card payments.

For example:

28/36 (Conventional)

• 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 Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

Not Your Average Lender can walk you through the pitfalls of getting a mortgage. Call us: 9722039033.