Board Topic: Debt to Income Ratio
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Debt to Income Ratio

Posted by: Seann May 1 2004, 09:00 PM
How do you calculate Debt to Income ratio and one's personal cash flow. Thanks in advance.

Posted by: loanuniverse May 2 2004, 10:58 AM
Seann:

If you are looking at this from the point of view of a residential lender, then they use what is called the 28/36 qualifying ratio.

The 28 portion of the ratio means that your housing expenses should not be more than 28% of your gross income.

The 36 portion of the ratio means that your total debt expenses {including housing} should not be more than 36% of your gross income.


However, if you are looking at this from a commercial lender point of view, you have to take into account that your personal cash flow is not the primary source of repayment. Commercial credit analysts use something similar to what I wrote in here a long time ago.

Hope this helps
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