Debt Ratios for Residential Financing

The ratio of debt to income is a tool lenders use to determine how much money is available for your monthly mortgage payment after all your other recurring debts are met.

Understanding the qualifying ratio

For the most part, 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) 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 (including loan principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt together. Recurring debt includes things like auto payments, child support and credit card payments.

Some example data:

A 28/36 ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, please use this Mortgage Pre-Qualification Calculator.

Just Guidelines

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

Custom Lending Group can walk you through the pitfalls of getting a mortgage. Give us a call at (707) 252-2700.

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