Debt Ratios for Residential Financing

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

About your qualifying ratio

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

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

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt together. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

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, please use this Mortgage Qualification Calculator.

Guidelines Only

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

South County Mortgage can walk you through the pitfalls of getting a mortgage. Call us at (401) 583-4150.

Got a Question?

Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.

Your Information
Your Question