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 the qualifying ratio

In general, conventional mortgages need 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 be spent on housing. This ratio is figured on your total payment, including hazard insurance, homeowners' dues, Private Mortgage Insurance - everything.

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

For example:

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 with your own financial data, we offer a Loan Qualifying Calculator.

Guidelines Only

Remember these are just guidelines. We will be thrilled to help you pre-qualify to help you figure out how much you can afford.

Acceptance Capital Mortgage Corporation can walk you through the pitfalls of getting a mortgage. Give us a call: (337) 453-0012.

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