Debt Ratios for Residential Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other recurring loans.

Understanding your qualifying ratio

Most 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.

In these ratios, the first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything that makes up the full payment.

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

Some example data:

28/36 (Conventional)

  • 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 run your own numbers, please use this Loan Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We will be thrilled to help you pre-qualify to determine how much you can afford.

At AmeriBest Mortgage, we answer questions about qualifying all the time. Call us at (321) 777-7277.

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