Which component is NOT included in the 28/36 ratio analysis?

The 28/36 ratio analysis is a financial guideline used to determine an individual's ability to manage housing expenses and total monthly debt obligations. This analysis considers two key components: the maximum allowable monthly housing payment and the total monthly debt payments in relation to the individual's gross income.

In this context, the 28% portion represents the ideal maximum of a person's gross monthly income that should be allocated toward housing expenses, such as mortgage payments, property taxes, and homeowner's insurance. The 36% component refers to the total debt load, which includes not only housing expenses but also all other debts, such as car loans and credit card payments. By evaluating these factors, lenders can assess a person's financial stability and risk level.

However, credit card balances themselves are not calculated as a separate component in the 28/36 ratio. Instead, the monthly payment on credit card debt is incorporated into the total monthly debt payments considered in the 36% guideline. Thus, while credit card obligations may affect the overall debt ratio, the balance of credit cards is not a direct part of the 28/36 analysis.

Understanding this framework is essential for individuals seeking to obtain credit or mortgage loans, as it helps them maintain healthy financial management and avoid overextending themselves.