Ratio of Debt to Income

The ratio of debt to income is a tool lenders use to determine how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met.

How to figure the qualifying ratio

Usually, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (this includes loan principal and interest, private mortgage insurance, homeowner's insurance, property tax, and homeowners' association dues).

The second number is what percent of your gross income every month that can be spent on housing expenses and recurring debt together. For purposes of this ratio, debt includes credit card payments, car loans, child support, etcetera.

Examples:

A 28/36 ratio

  • Gross monthly income of $3,500 x .28 = $980 can be applied to housing
  • Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing
  • Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, use this Mortgage Qualification Calculator.

Just Guidelines

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

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

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