Debt Ratios for Residential Lending

Your debt to income ratio is a tool lenders use to determine how much money can be used for your monthly home loan payment after you have met your various other monthly debt payments.

Understanding your qualifying ratio

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

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing costs (including principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto payments, child support, and the like.

For example:

28/36 (Conventional)

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

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

Guidelines Only

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

Executive Lending Group can walk you through the pitfalls of getting a mortgage. Give us a call at 4056158543.