Debt Ratios for Residential Lending

Your ratio of debt to income is a tool lenders use to calculate how much of your income is available for a monthly home loan payment after you have met your other monthly debt payments.

How to figure the qualifying ratio

Usually, conventional loans need a qualifying ratio of 28/36. FHA loans are less strict, 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 applied to housing (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes things like car payments, child support and credit card payments.

Examples:

With a 28/36 qualifying 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 want to run your own numbers, we offer a Mortgage Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.

At Executive Lending Group, LLC, we answer questions about qualifying all the time. Give us a call at 8165258000.

Got a Question?

Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.

Your Information
Your Question
By checking the box, you agree that Executive Lending Group, LLC may call/text you about your inquiry, which may involve use of automated means and prerecorded/artificial voices.. Message/data rates may apply.