Debt Ratios for Residential Financing

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

How to figure your qualifying ratio

For the most part, conventional mortgages require a qualifying ratio of 36/43. An FHA loan will usually allow for a higher debt load, reflected in a higher (43/43) qualifying ratio.

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, PMI - everything.

The second number is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt together. Recurring debt includes things like auto/boat payments, child support and monthly credit card payments.

Examples:

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 run your own numbers, feel free to use our very useful Mortgage Qualification Calculator.

Remember these ratios are just guidelines. We will be happy to go over pre-qualification to determine how large a mortgage you can afford. Alpine Capital Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: (208) 726-5466.

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