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 a monthly mortgage payment after all your other monthly debt obligations have been met.

Understanding the qualifying ratio

For the most part, conventional mortgage 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) qualifying ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing (this includes loan principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat loans, child support, etcetera.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualifying Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be thrilled to go over pre-qualification to help you figure out how much you can afford.

Amity Mortgage LLC can walk you through the pitfalls of getting a mortgage. Call us at 2037296681.

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185 Meadow St
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