What Are Qualifying Ratios?

Qualifying ratios are ratios that are commonly used by mortgage lenders in order to determine if you should qualify for a loan. Here are the basics of qualifying ratios.

Qualifying Ratios

Every lender uses some type of qualifying ratios when making lending decisions. Every lender is going to have their own percentages that they require from these qualifying ratios. Therefore, you are not going to find the same ratios with every lender that you work with. This means that if you are not approved at one lender because of the qualifying ratios, you could be approved at another.

Front End Ratio

One of the qualifying ratios that is commonly used is the front end ratio. The front end ratio is a comparison of how much your mortgage payment is going to be against how much you make on a monthly basis. Ideally, they would like to see an income that is much higher than what your mortgage payment is going to be. Typically, they want to see this number below 28 percent.

Back End Ratio

The back end ratio includes all debt that you have, including your mortgage payment, and compares that to your income. This number is typically supposed to be below 38 percent.

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