Debt Ratios for Residential Financing

Your debt to income ratio is a tool lenders use to determine how much money is available for a monthly mortgage payment after you meet your other monthly debt payments.

How to figure your qualifying ratio

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

In these ratios, the first number is how much (by percent) of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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 monthly credit card payments.

For example:

28/36 (Conventional)

  • 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 calculate pre-qualification numbers on your own income and expenses, we offer a Loan Pre-Qualifying Calculator.

Just Guidelines

Remember these are only guidelines. We'd be happy to pre-qualify you to help you determine how large a mortgage you can afford.

At VSI Home Lending, we answer questions about qualifying all the time. Call us at (260) 338-2561.

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