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----- quick qualification summary -----

display strong ratios

maintain the 28% and 36% rule

Your capacity to repay the mortgage loan is an important factor for lending institutions to qualify you for a loan. Lenders use two ratios to determine loan repayment capacity:

  1. Housing Ratio:
    your total housing payment - including the monthly loan payment, insurance, taxes and other community assessments - do not exceed 28% of your gross monthly income
  2. Debt Ratio:
    your total debts - including your housing debt, auto debt, student loan debt, credit card debt and other consumer debt - do not exceed 36% of your gross monthly iincome

If either of these capacity ratios are too high, you will need to change one of the following parameters in order to qualify:

  • reduce your borrowed amount
  • increase your amount of down payment
  • qualify for a mortgage loan that has a lower rate
  • apply for federal assistance sponsored loans
  • increase your income
  • pay off outstanding debts


Calculating Your Capacity Ratio

1: The "housing ratio":
calculated by dividing monthly housing expenses by your gross monthly income. As a basic rule, the housing ratio should not exceed 28%.

What are your monthly housing expenses:

  • current mortgage loan payment on your home including interest and principal
  • real estate taxes
  • hazardous insurance
  • private Mortgage Insurance, if any
  • other mortgage related insurance
  • homeowner's association dues
  • ground keeping fees
  • property leases
  • other special assessments and financing

Monthly Income includes the following:

  • gross employment income
  • overtime bonuses and commissions
  • net self-employment income
  • alimony, child support and income from public assistance
  • social security, retirement, and VA benefits
  • workman's compensation or permanent disability payments
  • interest and dividend income
  • income from trust, partnerships, etc.
  • net rental income
Housing Ratio Calculator
input the following data to calculate your housing ratio:

Total Monthly Income:

Housing Ratio (should be around 28%): %

2: The "debt-to-income ratio"

calculated by dividing your fixed monthly expenses by your gross monthly income. As a basic rule, debt ratio should not exceed 36%.

What are your fixed monthly expenses:

  • monthly housing expenses included above
  • monthly installment loan payments
  • monthly revolving credit line payments
  • real estate loan payment on non-income producing property
  • alimony and child support
  • any tax or legal assessments.


Debt-to-Income Ratio Calculator
Input the following data to calculate your housing ratio:

Total Monthly Income (from above):

Debt-to-Income Ratio (approx. 36% or less): %

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