Consumer Credit Ratios -16

Lenders can’t tell how much you earn from your credit report, they rely
on the earnings figures that you report to them. Looking at your credit
report tells lenders only what you owe and how much your monthly
payments are on the accounts that are reported. They compare your
earnings with those monthly payments to come up with the debt-to-
income ratio. Most lenders want to see that your total monthly
obligations don’t exceed 50% of your pre-tax income.

The second standard ratio is the housing expense ratio. This one is
specifically used when purchasing a home loan. The lender will first
look to see that your debt-to-income ratio doesn’t exceed their limits,
then will caluclate your housing expense ratio. This is the comparision
of your monthly mortgage payment for the proposed mortgage compared
with your pre-tax income. The standard is that your mortgage payment
should not exceed 30% of your total income.