Debt Ratios for Home Financing

Lenders use a ratio called "debt to income" to determine the most you can pay monthly after your other recurring debts have been paid.

Understanding your qualifying ratio

In general, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, HOA dues, PMI - everything.

The second number in the ratio is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. Recurring debt includes auto payments, child support and monthly credit card payments.

For example:

With a 28/36 qualifying ratio

• Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
• Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
• Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, we offer a Loan Qualification Calculator.

Guidelines Only

Don't forget these are just guidelines. We will be happy to pre-qualify you to 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. Call us at 3103737406.