Debt Ratios for Residential Lending

Your 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 all your other recurring debts have been met.

How to figure the qualifying ratio

Usually, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are a little 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 (including loan principal and interest, private mortgage insurance, hazard insurance, taxes, and HOA dues).

The second number in the ratio is what percent of your gross income every month which can be spent on housing expenses and recurring debt together. Recurring debt includes credit card payments, auto loans, child support, and the like.

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 want to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Qualification Calculator.

Just Guidelines

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

At First Community Bank of Central Al., we answer questions about qualifying all the time. Call us: (334) 285-8850.

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