Debt Ratios for Residential Financing

The debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly mortgage payment after you meet your other monthly debt payments.

How to figure your qualifying ratio

Usually, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

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

The second number is the maximum percentage of your gross monthly income which can be applied to housing costs and recurring debt. Recurring debt includes car payments, child support and monthly credit card payments.

Examples:

With a 28/36 ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

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

Guidelines Only

Remember these ratios are only guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

MidTowne Mortgage can walk you through the pitfalls of getting a mortgage. Call us: (478) 746-2063.

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