# Debt Ratios for Residential Financing

Your ratio of debt to income is a formula lenders use to calculate how much money can be used for a monthly mortgage payment after you meet your various other monthly debt payments.

### Understanding the qualifying ratio

In general, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less restrictive, 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 costs. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, PMI - everything.

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt. Recurring debt includes credit card payments, auto/boat loans, child support, etcetera.

### Examples:

28/36 (Conventional)

• 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'd like to run your own numbers, we offer a Mortgage Qualification Calculator.

### Just Guidelines

Don't forget these are just guidelines. We will be happy to pre-qualify you to help you determine how large a mortgage loan you can afford.