Debt Ratios for Home Lending

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

About the qualifying ratio

Typically, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

For these ratios, 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 homeowners' insurance, homeowners' dues, PMI - everything.

The second number is the maximum percentage of your gross monthly income that should be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes payments on credit cards, auto payments, child support, etcetera.

For example:

With a 28/36 qualifying ratio

  • 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'd like to calculate pre-qualification numbers with your own financial data, we offer a Mortgage Loan Qualification Calculator.

Guidelines Only

Don't forget these are only guidelines. We will be thrilled to pre-qualify you to determine 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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