Debt Ratios for Residential Financing

The ratio of debt to income is a formula lenders use to calculate how much money is available for your monthly mortgage payment after you have met your various other monthly debt payments.

About the qualifying ratio

For the most part, conventional mortgages 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 be applied to housing costs (this includes mortgage principal and interest, PMI, homeowner's insurance, property tax, and HOA dues).

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

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 with your own financial data, please use this Mortgage Qualification Calculator.

Guidelines Only

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

Harbor View Lending* a DBA of Megastar Financial can answer questions about these ratios and many others. Give us a call at (207) 571-8034.