Debt Ratios for Residential Financing

Your debt to income ratio is a tool lenders use to determine how much of your income can be used for your monthly mortgage payment after all your other recurring debts have been fulfilled.

About the qualifying ratio

Usually, underwriting for conventional mortgages requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (this includes loan principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, car loans, child support, and the like.

For example:

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 run your own numbers, use this Mortgage Loan Qualifying Calculator.

Guidelines Only

Don't forget these are only guidelines. We'd be happy to help you pre-qualify to determine how large a mortgage loan you can afford.

Abbey Mortgage can walk you through the pitfalls of getting a mortgage. Call us: 3523694200.

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Abbey Mortgage

Company NMLS#: 374095

2107 SE 3rd Ave.
Ocala, FL 34471