Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other recurring loans.

About the qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.

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

The second number is the maximum percentage of your gross monthly income that should be spent on housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, and the like.

For example:

28/36 (Conventional)

  • 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 run your own numbers, use this Mortgage Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.

At First Southeast Mortgage Corporation, we answer questions about qualifying all the time. Give us a call: 954.920.9799.

Basic Pre-Approval

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