Debt Ratios for Residential Lending

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

About the qualifying ratio

Typically, conventional loans need 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 in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing costs (this includes mortgage principal and interest, PMI, hazard insurance, property taxes, and HOA dues).

The second number is the maximum percentage of your gross monthly income that can be applied to housing costs and recurring debt together. Recurring debt includes things like car loans, child support and monthly credit card payments.

For example:

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 want to run your own numbers, we offer a Mortgage Pre-Qualifying Calculator.

Remember these are just guidelines. We'd be thrilled to pre-qualify you to help you determine how much you can afford. At Alerus Mortgage, we answer questions about qualifying all the time. Call us: (612) 386-5901.

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