Debt Ratios for Residential Financing

The debt to income ratio is a formula lenders use to determine how much money can be used for your monthly mortgage payment after all your other recurring debts are fulfilled.

How to figure the qualifying ratio

Most conventional mortgages need 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, homeowners' dues, PMI - everything.

The second number in the ratio is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes credit card payments, car loans, child support, and the like.

Examples:

With 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 run your own numbers, use this Loan Qualifying Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be happy to pre-qualify you to help you figure out how large a mortgage you can afford.

AFI Mortgage Company can walk you through the pitfalls of getting a mortgage. Give us a call: (337) 494-5626.

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