Debt Ratios for Residential Financing

The ratio of debt to income is a tool lenders use to determine how much of your income can be used for a monthly mortgage payment after all your other monthly debts have been fulfilled.

About your qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less strict, 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 costs (this includes mortgage principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt. Recurring debt includes auto/boat loans, child support and monthly credit card payments.

Some example data:

With a 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 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 are only guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage you can afford.

Augusta Mortgage Solutions can answer questions about these ratios and many others. Call us at 706-860-5514.

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