Debt Ratios for Residential Financing

The debt to income ratio is a formula lenders use to calculate how much of your income is available for your monthly home loan payment after all your other recurring debt obligations have been fulfilled.


How to figure your qualifying ratio

In general, conventional mortgages need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, PMI, hazard insurance, property tax, and HOA dues).

The second number is what percent of your gross income every month that should be applied to housing costs and recurring debt together. Recurring debt includes things like car loans, child support and credit card payments.

Some example data:

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 want to calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Loan Qualification Calculator.

Don't forget these ratios are only guidelines. We'd be happy to go over pre-qualification to help you determine how much you can afford. West Community Credit Union can walk you through the pitfalls of getting a mortgage. Give us a call: 636-720-2432. Want to get started? Apply Online Now.

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