When determining whether to approve a home loan, one of the factors considered is the ratio of income to monthly expenses, referred to as a “debt ratio.” Expenses excluded from this calculation include food, clothing, insurance, taxes, entertainment and utilities. Loan approval standards have evolved, constantly changing as the result of the on-going analysis by lenders of loans with payments that become delinquent. Although different loan scenarios have different limits on the debt ratio, lenders today generally will not approve a loan of up to $417000 if the debt ratio exceeds 50%, or for loans over $417000 with a debt ratio that exceeds 45%.
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