How to Calculate a 29/41 Qualifying Ratio for a Mortgage Loan

Make sure you have the right qualifying ratio before putting in a home offer.

Make sure you have the right qualifying ratio before putting in a home offer.

It can feel like there are many hoops to jump through before you actually land your mortgage. One of the many things that will be scrutinized -- in addition to your work history and credit score -- is your ability to afford the mortgage payment. This is determined using a debt-to-income ratio. For conventional or conforming loans, you will need a ratio of 28/36, but FHA requires a more accessible ratio of 29/41 for its loans. These are maximums, so the lower the better. The first number is called the front-end ratio. The second number is the back-end ratio.

Add up all of your income, before tax and deductions, and jot this number down.

Calculate the front-end ratio using the first figure, 29. If your monthly gross income is $5,000, multiply $5,000 by 0.29, or 29 percent. You get $1,450. This is the mortgage payment -- including interest, insurance and escrow -- you qualify for based on the front-end ratio.

Add all your monthly debts that are listed on your credit report to the proposed mortgage payment of $1,450. Use minimum monthly payments, such as the minimum payment on credit cards and your monthly car payment to calculate your debt. For example, if your monthly debts totaled $500, your grand total would be $1,950.

Calculate the back-end ratio using the second figure, 41. If your monthly gross income is $5,000, multiply $5,000 by 0.41, or 41 percent. You get $2,050. This is the maximum allowed for your mortgage payment and your other monthly debts combined.

Reduce your debt if your back-end ratio is too high to qualify. However, if your proposed mortgage amount and your monthly debt is less than or equal to the back-end ratio of 41 percent, you might qualify for a mortgage.


About the Author

Sara Mahuron specializes in adult/higher education, parenting, budget travel and personal finance. She earned an M.S. in adult/organizational learning and leadership, as well as an Ed.S. in educational leadership, both from the University of Idaho. Mahuron also holds a B.S. in psychology and a B.A. in international studies-business and economics.

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