Debt Ratios for Residential Financing

Your debt to income ratio is a formula lenders use to determine how much of your income can be used for a monthly home loan payment after you meet your other monthly debt payments.

About your qualifying ratio

For the most part, conventional mortgages need 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. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the full payment.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, and the like.

Some example data:

With 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 Pre-Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be happy to help you pre-qualify to help you figure out how large a mortgage you can afford.

Americn Hero Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: 754-202-4376.

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