Debt Ratios for Residential Financing

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

How to figure your qualifying ratio

Usually, underwriting for conventional loans requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can be spent on housing costs (including loan principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and HOA dues).

The second number is what percent of your gross income every month which can be spent on housing costs and recurring debt. Recurring debt includes things like auto/boat loans, child support and credit card payments.

Examples:

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'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our Mortgage Loan Pre-Qualifying Calculator.

Don't forget these are only guidelines. We'd be happy to pre-qualify you to help you determine how large a mortgage loan you can afford. At Executive Lending Group, we answer questions about qualifying all the time. Call us at (405) 822-1957.

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