Debt Ratios for Residential Financing

Your ratio of debt to income is a tool lenders use to calculate how much of your income can be used for a monthly mortgage payment after all your other monthly debt obligations are fulfilled.

About your qualifying ratio

For the most part, underwriting for conventional mortgages needs 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 in a qualifying ratio is the maximum percentage of gross monthly income that can go to housing (this includes principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt. Recurring debt includes vehicle payments, child support and credit card payments.

For example:

With a 28/36 ratio

• Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
• Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
• Gross monthly income of $8,000 x .41 = $3,280 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 Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be happy to go over pre-qualification to determine how large a mortgage loan you can afford.

Boardwalk Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call at 1-800-606-2794.