Debt Ratios for Residential Financing

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

About your qualifying ratio

Usually, underwriting for conventional 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.

For these ratios, the first number is the percentage of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month which can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto/boat loans, child support, etcetera.

Examples:

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 want to run your own numbers, feel free to use our Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget 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 Abbey Mortgage, we answer questions about qualifying all the time. Call us: 3523694200.

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Abbey Mortgage

Company NMLS#: 374095

2107 SE 3rd Ave.
Ocala, FL 34471