Ratio of Debt-to-Income

The debt to income ratio is a tool lenders use to determine how much of your income can be used for your monthly mortgage payment after you meet your other monthly debt payments.

How to figure the qualifying ratio

In general, conventional loans require a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

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 hazard insurance, homeowners' dues, Private Mortgage Insurance - everything that makes up the payment.

The second number in the ratio is what percent of your gross income every month that should be applied to housing expenses and recurring debt together. Recurring debt includes credit card payments, vehicle payments, child support, and the like.

Some example data:

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 calculate pre-qualification numbers on your own income and expenses, we offer a Mortgage Loan Qualification Calculator.

Just Guidelines

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.

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

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