Debt Ratios for Residential Financing

Your debt to income ratio is a formula lenders use to determine how much money is available for your monthly mortgage payment after all your other monthly debts are fulfilled.

How to figure your qualifying ratio

In general, underwriting for conventional loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

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

The second number is what percent of your gross income every month which can be spent on housing expenses and recurring debt together. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Pre-Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We'd be thrilled to help you pre-qualify to help you figure out how much you can afford.

At Family Mortgage Company of Hawaii, Inc. NMLS #244497, we answer questions about qualifying all the time. Give us a call: (808) 935-0678.

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