Debt Ratios for Residential Financing

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

About the qualifying ratio

Typically, conventional loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 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, PMI, hazard insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt. Recurring debt includes car payments, child support and monthly credit card payments.

For example:

With a 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be thrilled to go over pre-qualification to determine how much you can afford.

Foxfield Financial can answer questions about these ratios and many others. Give us a call at 720-598-8300.

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