Debt-to-Income Ratio

Your ratio of debt to income is a tool lenders use to calculate how much of your income can be used for a monthly home loan payment after all your other monthly debts are met.

About your qualifying ratio

Most underwriting for conventional mortgages needs a qualifying ratio of 28/36. FHA loans are a little 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 be spent on housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything.

The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes auto loans, child support and credit card payments.

Examples:

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 on your own income and expenses, we offer a Loan Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be thrilled to go over pre-qualification to help you figure out how large a mortgage loan you can afford.

First Community Bank of Central Al. can walk you through the pitfalls of getting a mortgage. Give us a call: (334) 285-8850.

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