Debt Ratios for Residential Financing

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

About your 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.

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

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

For example:

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 run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Just Guidelines

Remember these ratios are only guidelines. We'd be happy to pre-qualify you to help you figure out how much you can afford.

At U.S.A. Lending, Inc., we answer questions about qualifying all the time. Call us at 305-967-7200.