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Using Qualifying Ratios

Example of GuidelinesA single person with an annual salary of $40,000 has a gross (before taxes) monthly income of $3,333.33. Using the qualifying ratios just mentioned, the amount allowed for housing is $3,333 x 33% = $1,100. The amount allowed for total debt is $3,333 x 38% = $1,266. As you can see, that does not allow for much in the way of debt; in this case, only $166 per month. Any debt in excess of this amount will have a direct effect on the amount that can be borrowed. Look at the following chart and see if you can calculate your own allowable amounts using the 33/38 ratios:
Qualifying Ratio Chart 33/38%
Annual
Income		 Monthly Gross
Income		 Housing
Expense at 33%		 Total Debt
Expense at 38%
$30,000 $2,500 $825 $950
$40,000 $3,333 $1,100 $1,266
$50,000 $4,167 $1,375 $1,583
$60,000 $5,000 $1,650 $1,900

Guidelines Vary by Lender
Remember, these ratios are common guidelines and can vary depending on the loan program and the lender. Qualifying ratios are never cut and dry — there are many grey areas. That’s why it’s important to work with a home loan consultant to find the loan product best suited to your particular needs.
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