Debt Ratios for Residential Financing

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

How to figure the qualifying ratio

For the most part, conventional mortgages require 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.

The first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that should be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, auto loans, child support, and the like.

Some example data:

With a 28/36 ratio

  • 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 calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage you can afford.

At Amity Mortgage LLC, we answer questions about qualifying all the time. Call us at (203) 729-6681.

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