Debt Ratios for Residential Financing

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other monthly debts.

About your qualifying ratio

In general, conventional mortgage loans require 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.

In 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, homeowners' dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, vehicle loans, child support, etcetera.

Some example data:

28/36 (Conventional)

  • 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'd like to run your own numbers, we offer a Mortgage Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be happy to help you pre-qualify to help you determine how much you can afford.

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

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