Debt Ratios

• Lenders typically limit conventional mortgage monthly costs to 28 percent of a person's income. In addition, lenders do not want the borrower's total debt payments, including the mortgage costs, to exceed 36 percent of their pretax income.
  
  

Include Home Costs

• When calculating 28 percent and 36 percent of pretax income, include the cost of real estate taxes and homeowner's insurance in the monthly mortgage costs. In addition, if a borrower cannot make a 20 percent down payment, lenders will usually require her to pay for private mortgage insurance, which also counts toward the limits.
  
  

Bottom Line

• Borrowers should consider the total costs of the mortgage, according to Bankrate, when making decisions about how much they can afford for a mortgage. The total monthly costs should not exceed 28 percent of the monthly income, and may be less if the borrower has significant other debt.