Debt Ratios for Residential Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you've paid your other monthly debts.

Understanding your qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, vehicle loans, child support, etcetera.

Some example data:

28/36 (Conventional)

  • 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, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We'd be happy to help you pre-qualify to help you determine how large a mortgage loan 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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