Debt Ratios for Residential Lending

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The ratio of debt to income is a formula lenders use to calculate how much of your income can be used for a monthly mortgage payment after all your other monthly debts are fulfilled.

About your qualifying ratio

Most underwriting for conventional mortgage loans needs 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 amount (as a percentage) of your gross monthly income that can be applied to housing (including principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt. Recurring debt includes auto/boat loans, child support and credit card payments.

For example:

28/36 (Conventional)

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, use this Loan Pre-Qualification Calculator.

Just Guidelines

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

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