Ratio of Debt-to-Income

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

About the qualifying ratio

Most underwriting for conventional mortgages requires 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 percentage of gross monthly income that can be spent on housing costs (including principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and HOA dues).

The second number in the ratio is the maximum percentage of your gross monthly income which can be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes payments on credit cards, car loans, child support, etcetera.

Examples:

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 want to run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Guidelines Only

Remember these are only guidelines. We'd be happy to go over pre-qualification to help you determine how much you can afford.

First Community Bank of Central Al. can answer questions about these ratios and many others. Call us at (334) 285-8850.

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