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.

About your qualifying ratio

Most 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) ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, property tax, and homeowners' association dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt together. Recurring debt includes things like auto loans, child support and credit card payments.

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'd like to calculate pre-qualification numbers with your own financial data, use this Mortgage Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be thrilled to help you pre-qualify to help you determine how large a mortgage loan you can afford.

1st Credential Mortgage Inc can answer questions about these ratios and many others. Call us: (281) 778-0805.

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