Debt Ratios for Residential Financing

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

About your qualifying ratio

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

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything.

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

Some example data:

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 run your own numbers, use this Mortgage Loan Qualification Calculator.

Guidelines Only

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

At Southwest Funding #841
Company NMLS # 303440, we answer questions about qualifying all the time. Call us: 5122916100.