Debt Ratios for Residential Financing

Your debt to income ratio is a formula lenders use to determine how much of your income is available for your monthly mortgage payment after you meet your various other monthly debt payments.

How to figure the qualifying ratio

Usually, 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.

In these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. Recurring debt includes auto loans, child support and credit card payments.

Some example data:

With a 28/36 qualifying ratio

• Gross monthly income of \$2,700 x .28 = \$756 can be applied to housing
• Gross monthly income of \$2,700 x .36 = \$972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of \$2,700 x .29 = \$783 can be applied to housing
• Gross monthly income of \$2,700 x .41 = \$1,107 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Loan Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be thrilled to go over pre-qualification to determine how much you can afford.

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