Debt Ratios for Residential Lending

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

Understanding the qualifying ratio

Usually, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are 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 be applied to housing (this includes loan principal and interest, PMI, homeowner's 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 auto payments, child support and credit card payments.

For example:

28/36 (Conventional)

  • 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 Mortgage Loan Pre-Qualifying Calculator.

Just Guidelines

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

Family Mortgage Company of Hawaii, Inc. NMLS #244497 can walk you through the pitfalls of getting a mortgage. Call us: (808) 935-0678.

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