Debt Ratios for Residential Financing

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

About the qualifying ratio

Most conventional loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can be applied to housing (including mortgage principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).

The second number is the maximum percentage of your gross monthly income that can be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, vehicle payments, child support, and the like.

Examples:

A 28/36 ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be happy to help you pre-qualify to help you figure out how large a mortgage you can afford.

Affirm Home Loans can answer questions about these ratios and many others. Give us a call: (972) 292-0448.

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