Debt Ratios for Residential Lending

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

How to figure your qualifying ratio

For the most part, conventional loans need a qualifying ratio of 28/36. FHA loans are less restrictive, 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, PMI - everything that constitutes the payment.

The second number in the ratio is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. Recurring debt includes payments on credit cards, auto/boat 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 calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Loan Qualifying Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

At Executive Lending Group, we answer questions about qualifying all the time. Call us: 4056158543.

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Executive Lending Group

A Division of 1st Capital Mortgage LLC

2401 Tee Circle, STE 102B
Norman, OK 73069