Debt Ratios for Residential Lending

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

About your qualifying ratio

In general, conventional loans need a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, Private Mortgage Insurance - everything.

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

Examples:

With a 28/36 qualifying ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

The Mortgage Exchange Service LLC can walk you through the pitfalls of getting a mortgage. Give us a call: 703.255-5810.

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