Debt Ratios for Residential Lending

The debt to income ratio is a tool lenders use to determine how much money can be used for your monthly mortgage payment after you meet your other monthly debt payments.

About the qualifying ratio

For the most part, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month which can be applied to housing expenses and recurring debt. Recurring debt includes credit card payments, car loans, child support, etcetera.

For example:

A 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Pre-Qualifying Calculator.

Guidelines Only

Don't forget these ratios are only guidelines. We will be happy to help you pre-qualify to determine how large a mortgage you can afford.

Nationwide Home Loans can walk you through the pitfalls of getting a mortgage. Give us a call: 5626935048.

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