Debt Ratios for Residential Financing

Your debt to income ratio is a formula lenders use to calculate how much money is available for a monthly mortgage payment after you have met your various other monthly debt payments.


How to figure your qualifying ratio

Usually, conventional mortgage loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the payment.

The second number is the maximum percentage of your gross monthly income that should be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car payments, child support, and the like.

For example:

With a 28/36 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'd like to run your own numbers, please use this Mortgage Pre-Qualification Calculator.

Don't forget these ratios are only guidelines. We'd be thrilled to go over pre-qualification to determine how large a mortgage loan you can afford. Liberty Mortgage can answer questions about these ratios and many others. Call us at 281-542-7392. Ready to begin? Apply Online Now.

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