Debt Ratios for Residential Financing

The debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly home loan payment after you meet your various other monthly debt payments.

How to figure the qualifying ratio

Most underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

For 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 hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

Examples:

With a 28/36 ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Loan Qualification Calculator.

Just Guidelines

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

Refresh Funding can walk you through the pitfalls of getting a mortgage. Give us a call at 305-800-3863.

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