Debt/Income Ratio

The debt to income ratio is a formula lenders use to determine how much of your income is available for your monthly mortgage payment after you meet your various other monthly debt payments.

How to figure the qualifying ratio

In general, conventional mortgage loans need a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

In these ratios, the first number is the percentage of your gross monthly income that can go toward housing. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, Private Mortgage Insurance - everything that constitutes the full payment.

The second number is what percent of your gross income every month that should be spent on housing costs and recurring debt together. For purposes of this ratio, debt includes credit card payments, auto/boat payments, child support, etcetera.

Examples:

A 28/36 ratio

  • 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 calculate pre-qualification numbers with your own financial data, use this Mortgage Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be thrilled to go over pre-qualification to help you determine 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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