Debt Ratios for Home Lending

Lenders use a ratio called "debt to income" to decide the most you can pay monthly after you've paid your other monthly debts.

How to figure the qualifying ratio

For the most part, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less restrictive, requiring a 29/41 ratio.

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

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

For example:

28/36 (Conventional)

  • 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 Loan Qualification Calculator.

Just Guidelines

Don't forget these are just guidelines. We'd be thrilled to pre-qualify you to help you figure out how much you can afford.

At Alerus Mortgage, we answer questions about qualifying all the time. Give us a call: 952 417 8481.

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