Chat with us, powered by LiveChat

Debt Ratios for Residential Lending

Your debt to income ratio is a formula lenders use to determine how much of your income can be used for your monthly mortgage payment after you meet your other monthly debt payments.

Understanding your qualifying ratio

For the most part, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing (this includes mortgage principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

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

Examples:

28/36 (Conventional)

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

Just Guidelines

Don't forget these ratios are just guidelines. We will be happy to help you pre-qualify to help you determine how much you can afford.

Net Equity Financial Mortgage can walk you through the pitfalls of getting a mortgage. Call us at (215)741-3131.

Basic Pre-Approval

Get the Best Mortgage Rate! Tell us a little about your current needs and we can use that information to match you with just the right loan.

Tell us about your loan needs.
How can we get in touch with you?
Tell us about your credit history.
By checking the box, you agree that Net Equity Financial Mortgage may call/text you about your inquiry, which may involve use of automated means and prerecorded/artificial voices.. Message/data rates may apply.