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Real Estate Glossary

What is Qualifying Ratios?

Qualifying Ratios - Qualifying ratios are used by lenders to determine a borrower's ability to repay a loan. They are calculated by taking into account the borrower's income, debts, and expenses. The two most common ratios used in mortgage lending are the front-end ratio and the back-end ratio. The front-end ratio, also known as the housing expense ratio, is the percentage of the borrower's income that is dedicated to housing expenses, including mortgage payments, property taxes, and insurance. The back-end ratio, also known as the debt-to-income ratio, is the percentage of the borrower's income that is dedicated to all debts, including the mortgage, credit cards, and car loans.