Debt Ratios for Residential Financing

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

About the qualifying ratio

In general, 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 percentage of gross monthly income that can be applied to housing costs (including mortgage principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number is what percent of your gross income every month which can be spent on housing expenses and recurring debt together. Recurring debt includes payments on credit cards, vehicle payments, child support, etcetera.

Some example data:

With a 28/36 qualifying 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'd like to calculate pre-qualification numbers with your own financial data, feel free to use our Mortgage Pre-Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be happy to help you pre-qualify to help you figure out how large a mortgage loan you can afford.

At Reliance Mortgage Service, Inc, we answer questions about qualifying all the time. Give us a call at 562 320-0510.

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