Business and Personal Finance Dictionary

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• QUALIFYING RATIO
  
  The ratio of the borrower's fixed monthly expenses to his gross monthly income. Ratios are expressed as two numbers like 28/36 where 28 would be the Front-End Ratio and 36 would be the Back-End Ratio. The Front-End Ratio is the percentage of a borrower's gross monthly income (before income taxes) that would cover the cost of PITI (Mortgage Principal Payment + Mortgage Interest Payment + Property Taxes + Homeowners Insurance). In the case of a 28% Front-End Ratio a borrower could qualify if the proposed monthly PITI payments were 28% or less than the borrower's gross monthly income. The Back-End Ratio is the percentage of a borrower's gross monthly income that would cover the cost of PITI plus any other monthly debt payments like car or personal loans and credit card debt. Please note that qualifying ratios are only a rough guideline in determining a potential borrower's credit-worthiness. Many factors such as excellent or poor credit history, amount of down payment, and size of loan will influence the decision to approve or disapprove a particular loan. Monstermoving.com urges all borrowers to discuss their particular situation with a qualified lender regardless of the outcome of any self-qualification exercise.
  
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