Debt Ratios for Residential Lending

Lenders use a ratio called "debt to income" to decide your maximum monthly payment after you have paid your other monthly debts.
 

About the qualifying ratio

Usually, underwriting for conventional mortgages needs a qualifying ratio of 35/43 for conventional loans.  FHA loans are a little less strict, requiring a 36/48 ratio.  The qualifying ration is in part, determined by the credit score.

The first number in a qualifying ratio is the maximum percentage of gross monthly income that can be applied to housing costs (this includes principal and interest, PMI, homeowner's insurance, property tax, and homeowners' association dues).

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

Examples

With a 35/43 conventional qualifying ratio

  • Gross monthly income of $2,700 x .35 = $945 can be applied to housing
  • Gross monthly income of $2,700 x .43 = $1,161 can be applied to recurring debt plus housing expenses

With a 36/48 FHA qualifying ratio

  • Gross monthly income of $2,700 x .36 = $972 can be applied to housing
  • Gross monthly income of $2,700 x .48 = $1,296 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualification Calculator.
 

Just Guidelines

Don't forget these are only guidelines. We will be happy to go over pre-qualification to determine how much you can afford.

 

We can answer questions about these ratios and many others

Call us Direct 954-605-2450 or Toll Free 888-246-9060