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 recurring debts.

About the qualifying ratio

For the most part, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 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.

The second number in the ratio is what percent of your gross income every month which 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, and the like.

For example:

28/36 (Conventional)

  • 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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to go over pre-qualification to help you figure out how much you can afford.

Executive Lending Group, LLC can answer questions about these ratios and many others. Call us at (816) 525-8000 & (81.

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