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What are ratios and how do they affect my ability to get a loan?

April 26, 2017ability affect loan ratios

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What are ratios and how do they affect my ability to get a loan?

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Ratios are a standard used in the mortgage banking industry to qualify a borrower. The “front ratio”, also known as the housing ratio, is your monthly housing expense (PITI) divided by your gross monthly income. The underwriting guideline standard for the housing ratio is 28%-33% of your gross monthly income. The “back ratio”, also known as the total debt ratio, is calculated by dividing the borrower’s total fixed monthly debt by their gross monthly income. This fixed monthly debt includes your PITI as well as car loans, student loans, credit card payments and any other installment loans. The underwriting guideline standard for the debt ratio is typically no higher than 38% of your gross monthly income. These ratios outline a borrower’s ability to afford a particular monthly housing payment. However, using today’s automatic underwriting guidelines, these ratios can be somewhat flexible. Ask your Signature Mortgage loan officer for more details. Back to top.