Debt Ratios for Residential Financing

Lenders use a ratio called "debt to income" to determine your maximum monthly payment after your other monthly debts are paid.

About your qualifying ratio

Most 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.

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

The second number is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. Recurring debt includes things like auto payments, child support and monthly credit card payments.

Some example data:

28/36 (Conventional)

  • 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'd like to run your own numbers, feel free to use our superb Loan Qualification Calculator.

Guidelines Only

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

Chase Mortgage can answer questions about these ratios and many others. Call us at 435-755-6622.