Debt Ratios for Residential Financing

The ratio of debt to income is a tool lenders use to determine how much of your income is available for your monthly home loan payment after you have met your various other monthly debt payments.

About the qualifying ratio

Typically, underwriting for conventional 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 percentage of gross monthly income that can go to housing (including principal and interest, PMI, hazard insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, car loans, child support, and the like.

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 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 Mortgage Qualification Calculator.

Just Guidelines

Remember these ratios are only guidelines. We will be happy to pre-qualify you to determine how much you can afford.

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

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