Debt Ratios for Residential Lending

Your debt to income ratio is a tool lenders use to calculate how much money is available for a monthly mortgage payment after you meet your other monthly debt payments.

How to figure your qualifying ratio

Typically, conventional mortgages 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 hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

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 calculate pre-qualification numbers with your own financial data, feel free to use our very useful Mortgage Loan Qualifying Calculator.

Just Guidelines

Remember these ratios are just guidelines. We will be thrilled to pre-qualify you to help you determine how large a mortgage loan you can afford.

At Riviera Funding NMLS#861382 CA DRE Broker #01186669, we answer questions about qualifying all the time. 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