Debt Ratios for Residential Financing

The debt to income ratio is a tool lenders use to calculate how much money is available for a monthly home loan payment after all your other recurring debt obligations have been fulfilled.

Understanding the qualifying ratio

Typically, conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

For these ratios, 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, Private Mortgage Insurance - everything.

The second number in the ratio 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, car payments, child support, etcetera.

For example:

A 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualifying Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to help you pre-qualify to help you determine how large a mortgage you can afford.

Crown Mortgage can walk you through the pitfalls of getting a mortgage. Call us: (434) 975-5626.

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