Debt Ratios for Residential Financing

The ratio of debt to income is a formula lenders use to calculate how much of your income is available for a monthly home loan payment after all your other recurring debts have been met.

Understanding your qualifying ratio

For the most part, conventional mortgages require 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 amount (as a percentage) of gross monthly income that can go to housing costs (including principal and interest, private mortgage insurance, homeowner's insurance, property tax, and HOA dues).

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

For example:

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, please use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be happy to go over pre-qualification to determine how large a mortgage you can afford.

Augusta Mortgage Solutions can answer questions about these ratios and many others. Call us at 7068605514.

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Augusta Mortgage Solutions

NMLS#:148529 GA Residential Mortgage Licensee #18861

141 North Belair Road Suite 102 NMLS# 149807
Evans, GA 30809-7431