Debt Ratios for Residential Financing

The 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 all your other recurring debts are fulfilled.

Understanding your qualifying ratio

Most underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of your gross monthly income that can go to housing costs (including principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

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

For example:

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 on your own income and expenses, feel free to use our very useful Loan Pre-Qualifying Calculator.

Guidelines Only

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

At Bright Vision Mortgage, we answer questions about qualifying all the time. Give us a call at (904) 342-3622.

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