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Debt Ratios for Residential Financing

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

About your qualifying ratio

For the most part, underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are 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 spent on housing costs (this includes loan principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. Recurring debt includes vehicle loans, child support and credit card payments.

For example:

A 28/36 ratio

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, please use this Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Don't forget these are only guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.

Town & Country Home Loans, Inc. can answer questions about these ratios and many others. Give us a call at (760)789-9995.

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