Debt Ratios for Residential Lending

The ratio of debt to income is a formula lenders use to determine how much of your income can be used for your monthly mortgage payment after you have met your various other monthly debt payments.

Understanding the qualifying ratio

Usually, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything that makes up the full payment.

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt together. Recurring debt includes things like vehicle loans, child support and credit card payments.

Some example data:

A 28/36 ratio

  • Gross monthly income of $8,000 x .28 = $2,240 can be applied to housing
  • Gross monthly income of $8,000 x .36 = $2,280 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $8,000 x .29 = $2,320 can be applied to housing
  • Gross monthly income of $8,000 x .41 = $3,280 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, please use this Loan Qualification Calculator.

Guidelines Only

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

At Triumph Mortgage Inc, we answer questions about qualifying all the time. Call us at 8327302000.

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