Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other recurring loans.

About your qualifying ratio

For the most part, underwriting for conventional mortgage loans requires 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 amount (as a percentage) of your gross monthly income that can be spent on housing costs (including mortgage principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt. Recurring debt includes credit card payments, auto/boat loans, child support, etcetera.

Some example data:

A 28/36 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 run your own numbers, use this Mortgage Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to pre-qualify you to help you determine how much you can afford.

Financial Edge Mortgage Corp. can answer questions about these ratios and many others. Call us: 425-508-9988.

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