Debt Ratios for Residential Lending

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for your monthly mortgage payment after all your other recurring debt obligations have been met.

How to figure your qualifying ratio

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

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

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

Some example data:

A 28/36 ratio

  • 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'd like to run your own numbers, feel free to use our very useful Loan Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to go over pre-qualification to help you determine how large a mortgage loan you can afford.

Americn Hero Mortgage can answer questions about these ratios and many others. Give us a call: 754-202-4376.

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