Qualifying Ratios

Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The "top" or "front" ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The "back" or "bottom" ratio includes housing costs as will as all other monthly debt.

If you are looking at refinancing your existing mortgage you can change your debt ratio by paying off existing debts with equity from your house. This will lower both your top and bottom ratios.

If you have a unique situation that does not allow all of your income to be counted there are some mortgages that will disregard what your debt to income, or qualifying ratio is.

For borrowers with pretty good credit and the right combination of compensating factors sometimes you can be approved for the best fixed rate programs available with the use of an automated underwriting engine, even if you have extremely high debt to income ratios. Standard conforming, good credit borrower mortgages, guidelines would generally like to see a front end debt to income ratio of 28% or less and a back-end debt to income ratio of 36% or below. However, with the use of automated underwriting engines now you can generally be approved for a mortgage with higher debt to income ratios.
For a sub-prime mortgage loan, a loan for people with either sub-par credit or they don't fit traditional guidelines, the normal or standard maximum debt to income ratio, also known as DTI, is generally 50%. Some sub-prime lenders have programs that will allow up to a 60% maximum debt to income ratios as well but usually the limit is 50-55 percent with these types of lenders. Using a mortgage broker can fit you with the perfect lender for your unique situation and qualify you for the loan that you deserve, even if your qualifying debt ratios are higher than what is typically allowed.

If you have a debt that has 10 or less monthly payments remaining you can usually exclude this payment from your debt to income ratio. This rule typically does not apply if the remaining payments are for a leased vehicle because chances are you will have to buy or lease another vehicle.

Different loan programs will have different ratios that need to be satisfied. Check with your mortgage professional to see what is needed to qualify.