Debt Ratios for Residential Financing
The ratio of debt to income is a tool lenders use to determine how much of your income is available for your monthly mortgage payment after all your other recurring debts have been fulfilled.
Understanding your qualifying ratio
Typically, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.
For these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that constitutes the full payment.
The second number in the ratio is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle payments, child support, etcetera.
For example:
28/36 (Conventional)
- Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
- Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
- Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses
If you want to calculate pre-qualification numbers with your own financial data, feel free to use our Loan Pre-Qualifying Calculator.
Guidelines Only
Don't forget these are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.
At Wize Mortgage LLC, we answer questions about qualifying all the time. Call us at .