Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other monthly debts are paid.

Understanding your qualifying ratio

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

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing (including mortgage principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle payments, child support, and the like.

Some example data:

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 want to run your own numbers, use this Mortgage Qualifying Calculator.

Just Guidelines

Don't forget these ratios are just guidelines. We will be happy to go over pre-qualification to help you determine how much you can afford.

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

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