Ratios of debt to income give a quick rule of gold lenders to determine how much you can borrow. They try to maintain affordable loans, keeping the payments for a modest percentage of their total income. Ratios of debt to income, they can quickly find a reasonable monthly payment - and use that number to calculate the total amount of loans.

Ratio of debt to income - Housing expense

Its expense ratio of housing debt is a recipe for measuring the percentage proportion of their income to cover housing payments. Housing payments consist primarily of everything on your monthly payment - principal, interest, taxes and insurance (PITI).

Lenders set certain limits on where you want your income to debt ratios. For example, they might say they want for their housing costs may be less than 28% of your gross monthly income.

Example

Suppose you earn $ 3000 per month (gross, or pre-tax), and your lender wants its ratio of debt to income must be less than 28%

3000 x .28 = 840

Your lender wants to spend 840 dollars or less per month expenditure on housing.

The housing expense ratio is sometimes called the "front" ratio of debt to income and must be cautious in applying this principle.

Ratio of debt to income - a long-term debt for large periods

The ratio of long-term debt is a debt to income ratio measuring the percentage of their income that goes to all payments of debt. Include your housing costs, together with other debt payments (such as auto loans, credit cards and other debts).

As costs of housing, the mortgage lender sets a limit to how high they want its ratio of long-term debt.

The debt ratio in the long term is also referred to as the "back" to income ratio of debt. Because the conditions for both sides? Lenders print income ratios of debt to two numbers: 33/38. The 33 (in front) is the housing expense ratio, and 38 (in back) is the ratio of long-term debt.

Improving the income ratios of debt

Sometimes, borrowers have to apply jointly for a better yield ratios of debt so they can make all the payments. A couple will use both spouses often "income (which means that both are not legally obliged to repay the debt) in applications for loans.