Debt Ratios for Residential Financing

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

How to figure the qualifying ratio

Usually, conventional loans require a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt together. Recurring debt includes things like auto/boat payments, child support and credit card payments.

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 want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be happy to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

At Augusta Mortgage Solutions, we answer questions about qualifying all the time. Call us: 7068605514.