Dictionary of Banking Terms: qualifying ratio
qualifying ratio
ratio used by mortgage lenders in determining the maximum amount of mortgage to approve, for example . . . the borrower's total regular monthly debt as a percentage of gross monthly income. The qualifying ratio is the lender's rule of thumb fordetermining a borrower's ability to pay.
Dictionary of Real Estate Terms: qualifying ratio
qualifying ratio
the maximum percentage of a borrower's income a lender or agency (FNMA, FHA, FHLMC) will allow prospective debt payments to be and still approve the loan.
Example: Qualifying ratios provide a test of lender risk exposure by limiting the amount of debt service burden a borrower is allowed to undertake. Specific ratios vary by loan product, generally being higher for loans designed for first-time buyers.
