Debt Ratios for Residential Financing

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

How to figure the qualifying ratio

Usually, conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes things like auto payments, 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 run your own numbers, use this Loan Qualifying Calculator.

Just Guidelines

Remember these are just guidelines. We'd be thrilled to go over pre-qualification to help you determine how large a mortgage loan you can afford.

Foxfield Financial can walk you through the pitfalls of getting a mortgage. Give us a call at 720-598-8300.

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