Qualifying Ratios

To ensure a buyer can afford the loan, lenders use specific calculations known as qualifying ratios. These ratios compare the borrower’s gross monthly income against their proposed monthly expenses. While specific limits vary by loan program (e.g., FHA vs. Conventional), the goal is to ensure the borrower is not overextended. There are typically two ratios analyzed: the "front-end ratio," which looks only at housing expenses, and the "back-end ratio," which includes housing expenses plus all other recurring consumer debts.