Debt Ratios for Residential Financing

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts are paid.

About your qualifying ratio

Usually, underwriting for conventional mortgage loans requires 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.

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 hazard insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto/boat payments, child support, etcetera.

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 want to calculate pre-qualification numbers with your own financial data, use this Loan Pre-Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We'd be thrilled to go over pre-qualification to determine how much you can afford.

Nationwide Home Loans can answer questions about these ratios and many others. Call us at 5626935048.

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Nationwide Home Loans

NMLS #238531| CA BRE #01017101

16211 Whittier Blvd.
Whittier, CA 90603