Debt Ratios for Home Lending

Your debt to income ratio is a formula lenders use to determine how much of your income is available for your monthly mortgage payment after you have met your various other monthly debt payments.

How to figure the qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

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

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes credit card payments, auto/boat loans, child support, etcetera.

Some example data:

28/36 (Conventional)

  • 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'd like to run your own numbers, feel free to use our Mortgage Loan Qualification Calculator.

Just Guidelines

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

Reliance Mortgage Service, Inc can walk you through the pitfalls of getting a mortgage. Give us a call: 562 320-0510.

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