Debt Ratios for Residential Financing

Your debt to income ratio is a tool lenders use to calculate how much of your income can be used for your monthly mortgage payment after all your other monthly debt obligations are met.

About the qualifying ratio

Most underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

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

The second number is what percent of your gross income every month that can be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto payments, child support, and the like.

Some example data:

A 28/36 qualifying 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 calculate pre-qualification numbers with your own financial data, feel free to use our Mortgage Loan Qualifying Calculator.

Guidelines Only

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

Harbor View Lending* a DBA of Megastar Financial can answer questions about these ratios and many others. Give us a call: (207) 571-8034.