Debt Ratios for Home Lending

The ratio of debt to income is a formula lenders use to determine how much money can be used for your monthly home loan payment after all your other monthly debt obligations are met.

How to figure the qualifying ratio

For the most part, conventional loans require a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

For these ratios, 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 homeowners' insurance, HOA dues, Private Mortgage Insurance - everything that makes up the full payment.

The second number is what percent of your gross income every month that should be spent on housing expenses and recurring debt together. Recurring debt includes things like auto/boat loans, child support and credit card payments.

For example:

28/36 (Conventional)

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you want to run your own numbers, use this Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these ratios are just guidelines. We will be happy to pre-qualify you to help you determine how large a mortgage 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.

Got a Question?

Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.

Your Information
Your Question