Ratio of Debt-to-Income

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after your other monthly debts have been paid.

About your qualifying ratio

In general, conventional loans 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 amount (as a percentage) of your gross monthly income that can be applied to housing (this includes mortgage principal and interest, private mortgage insurance, hazard insurance, taxes, and homeowners' association dues).

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes payments on credit cards, car payments, child support, etcetera.

Some example data:

With a 28/36 ratio

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

Just Guidelines

Remember these ratios are only guidelines. We'd be happy to help you pre-qualify to help you figure out how much you can afford.

At First Community Bank of Central Al., we answer questions about qualifying all the time. Give us a call at (334) 285-8850.

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