Debt Ratios for Residential Financing

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

About the qualifying ratio

For the most part, conventional loans need a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) qualifying ratio.

In 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, Private Mortgage Insurance - everything.

The second number is what percent of your gross income every month that can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, car payments, child support, and the like.

Some example data:

A 28/36 qualifying 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 want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Loan Qualifying Calculator.

Guidelines Only

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

At F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org), we answer questions about qualifying all the time. Call us at 214-300-8756.