Lenders use two ratios to qualify your requested loan application amount:

1. housing ratio
   The "housing ratio" is calculated by dividing monthly housing expenses by your gross monthly income. The housing ratio should not exceed 28%.
   
   
2. debt-to-income ratio
   The "debt-to-income ratio" is calculated by dividing your fixed monthly debt expenses (including the mortgage payment) by your gross monthly income. As a basic rule, the debt ratio should not exceed 36%.

Step 1: Calculate Your Housing Ratio

The "housing ratio" is calculated by dividing monthly housing expenses by your gross monthly income. The housing ratio should not exceed 28%.

• Monthly housing expenses includes real estate taxes, insurance, etc. If you don't have your real estate tax or insurance figures, the American Housing Survey shows that the median taxes paid averaged $12 per $1,000 in home value (divided by 12 months). The property insurance paid averaged $30 per month.
  
  

You may contact your local community and county officials to determine your true county and city tax factor:

• You can lookup your property tax assessments by community: www.statelocalgov.net

Private Mortgage Insurance (PMI) will be required if your down payment is less than 20% of the home purchase price.

• Your PMI monthly cost will average 0.005 of the borrowed amount divided by 12.

If you fail to pass either ratio, you may need to adjust your loan request to bring your ratios within approved levels.

Step 2: Calculate Your Debt-to-Income Ratio

• The "debt-to-income ratio" is calculated by dividing your fixed monthly debt expenses (including the mortgage payment) by your gross monthly income. As a basic rule, the debt ratio should not exceed 36%.

Estimated Total Housing Expense (from above):
Total Monthly Installment Loan Payments (auto, student, other):
Total Monthly Credit Line Payments (credit cards, credit lines):
Monthly R. Estate Non-Income Loan Payments:
Monthly Alimony and Child Support Payments:
Monthly Tax and Legal Assessments:
Monthly Other Payments:
Total Monthly Income (from above):
*
Debt-Income Ratio (should be around 36%):	%
Debt Ratio Barometer: 36% or less: debt level within acceptable range for most people. 37%-42%: debt level a little high, need to take corrective action to bring debt level down. You may consider paying off or consolidating some of your debt. 43%-50%: danger level, need to take immediate action before you lose control of your financial situation. 50% or more: excessive debt loan, may need to seek credit counseling services.