Debt/Income Ratio

Your debt to income ratio is a tool lenders use to calculate how much money can be used for your monthly home loan payment after all your other monthly debt obligations are fulfilled.

About the qualifying ratio

In general, conventional loans require a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

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, HOA dues, Private Mortgage Insurance - everything.

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

For example:

28/36 (Conventional)

  • Gross monthly income of $2,700 x .28 = $756 can be applied to housing
  • Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $2,700 x .29 = $783 can be applied to housing
  • Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, we offer a Mortgage Loan Qualification Calculator.

Just Guidelines

Remember these are just guidelines. We'd be happy to go over pre-qualification 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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