Debt Ratios for Home Lending

The ratio of debt to income is a tool lenders use to determine how much money is available for a monthly home loan payment after you have met your other monthly debt payments.

About the qualifying ratio

Most conventional loans need a qualifying ratio of 28/36. FHA loans are a little less restrictive, 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 go to housing costs (including mortgage principal and interest, PMI, homeowner's insurance, property taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that can be applied to housing expenses and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, etcetera.

Some example data:

A 28/36 ratio

  • 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 run your own numbers, feel free to use our Loan Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be happy to help you pre-qualify to determine how much you can afford.

Riviera Funding can walk you through the pitfalls of getting a mortgage. Call us: (310) 373-7406.

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