Debt Ratios for Residential Lending

The ratio of debt to income is a tool lenders use to determine how much money can be used for a monthly mortgage payment after all your other recurring debts are met.

How to figure the qualifying ratio

In general, conventional loans need 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 in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (including principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be applied to housing expenses and recurring debt together. Recurring debt includes things like auto loans, child support and monthly credit card payments.

For example:

With a 28/36 qualifying ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you want to calculate pre-qualification numbers on your own income and expenses, please use this Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these ratios are only guidelines. We will be thrilled to pre-qualify you to help you figure out how large a mortgage you can afford.

Riviera Funding NMLS#861382 CA DRE Broker #01186669 can answer questions about these ratios and many others. Give us a call: 3103737406.

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Riviera Funding NMLS#861382 CA DRE Broker #01186669

1801 S. Catalina Avenue Suite #201
Redondo Beach, CA 90277