• Debt Ratios for Residential Lending

    Your debt to income ratio is a tool lenders use to determine how much money can be used for your monthly home loan payment after you meet your various other monthly debt payments.

  • About the Qualifying Ratios

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

    The first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the full payment.

    The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt together. Recurring debt includes things like auto/boat loans, child support and credit card payments.

  • 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'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Pre-Qualification Calculator.