Debt Ratios for Residential Lending

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Lenders use a ratio called "debt to income" to determine the most you can pay monthly after you've paid your other monthly loans.

About the qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, property taxes, and HOA dues).

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, auto payments, 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 Loan Qualification Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to help you pre-qualify to help you determine how much you can afford.

We can walk you through the pitfalls of getting a mortgage. Give us a call: (206) 234-7544.