Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after you have paid your other monthly loans.

About the qualifying ratio

Most conventional mortgages require 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 be spent on housing (including mortgage principal and interest, private mortgage insurance, hazard insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes things like vehicle payments, child support and monthly credit card payments.

Examples:

28/36 (Conventional)

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, feel free to use our superb Mortgage Loan Qualification Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We will be thrilled to help you pre-qualify to help you determine how large a mortgage you can afford.

At The Mortgage Firm - Team Meyers, we answer questions about qualifying all the time. Give us a call: (407) 889-4321.

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