Debt Ratios for Residential Financing

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

Understanding the qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

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.

Some example data:

With a 28/36 qualifying ratio

  • 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 want to calculate pre-qualification numbers with your own financial data, please use this Loan Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to go over pre-qualification to determine how large a mortgage you can afford.

The Reen Team at American Pacific Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: (408) 626-1879.

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