Qualifying Ratios are set of ratios used by lenders to valuate potential borrowers for a mortgage and the maximum mortgage a borrower can afford.
Qualifying ratio is calculated by comparing front-end ratio (which is in general limited to 25%) with back-end ratio, (which is in general limited to 35%) of the potential borrower. These ratios are not necessary limited to these values, but depend on different risk factors.
Front-end ratio is calculated by comparing total housing expenses to gross monthly income of the borrower, and the back-end ratio is calculated by comparing total housing expenses together with any other debt, to gross monthly income of the borrower.
Qualifying ratios varies from lender to lender and often depends on current conditions on the market.
