Debt Ratios for Residential Lending

Your ratio of debt to income is a tool lenders use to determine how much money can be used for a monthly mortgage payment after all your other monthly debts are fulfilled.

How to figure your qualifying ratio

Most conventional mortgages require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

In these ratios, the first number is the percentage 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 in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. Recurring debt includes auto/boat payments, child support and monthly credit card payments.

For example:

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 calculate pre-qualification numbers with your own financial data, feel free to use our very useful Loan Pre-Qualifying Calculator.

Just Guidelines

Don't forget these ratios are only guidelines. We'd be happy to go over pre-qualification to help you figure out how much you can afford.

Signature Mortgage of Indiana can walk you through the pitfalls of getting a mortgage. Call us: 812-945-4400.

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