Debt Ratios for Home Financing

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

Understanding your qualifying ratio

Usually, conventional mortgage loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

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 homeowners' insurance, homeowners' dues, PMI - everything that constitutes the payment.

The second number is the maximum percentage of your gross monthly income which can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto loans, child support, etcetera.

Some example data:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 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 Loan Qualifying Calculator.

Just Guidelines

Don't forget these are only guidelines. We will be thrilled to help you pre-qualify to determine how much you can afford.

At Riviera Funding, we answer questions about qualifying all the time. Call us: (310) 373-7406.

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