Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other recurring debts have been paid.

About your qualifying ratio

In general, conventional 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 percentage of gross monthly income that can go to housing (including mortgage principal and interest, PMI, homeowner's insurance, taxes, and HOA dues).

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

Examples:

With a 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our Loan Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

Executive Lending Group, LLC can walk you through the pitfalls of getting a mortgage. Give us a call: 8165258000.

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