Debt Ratios for Residential Financing

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

How to figure your qualifying ratio

In general, conventional mortgages need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

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

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. Recurring debt includes auto/boat loans, child support and monthly credit card payments.

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 want to run your own numbers, feel free to use our very useful Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We will be happy to pre-qualify you to help you determine how much you can afford.

Pacific Loan Brokers can walk you through the pitfalls of getting a mortgage. Call us at 877-310-6200.

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