What is Qualifying Ratio ?
A qualifying ratio is a financial benchmark used by lenders to assess a borrower's eligibility for a loan. This ratio compares the borrower's income to their proposed debt obligations, such as monthly mortgage payments, property taxes, insurance, and other recurring debts. Lenders typically use two types of qualifying ratios: the front-end ratio, which includes housing-related expenses, and the back-end ratio, which includes all recurring debts. These ratios help lenders evaluate the borrower's ability to manage their debt load and determine if they can afford the loan they are applying for based on their income level. Lower qualifying ratios indicate a lower risk for lenders, while higher ratios may suggest potential financial strain for the borrower. The specific qualifying ratios can vary depending on the type of loan and lender's guidelines.
How to Calculate Qualifying Ratio?
Qualifying Ratio calculator uses Debt to Income Ratio = (Total Monthly Debt Payments/Gross Monthly Income)*100 to calculate the Debt to Income Ratio, The Qualifying Ratio is a financial benchmark used by lenders to evaluate a borrower's eligibility for a loan, typically comparing the borrower's income to their proposed debt obligations. Debt to Income Ratio is denoted by DTIR symbol.
How to calculate Qualifying Ratio using this online calculator? To use this online calculator for Qualifying Ratio, enter Total Monthly Debt Payments (TMDP) & Gross Monthly Income (GMI) and hit the calculate button. Here is how the Qualifying Ratio calculation can be explained with given input values -> 32.06897 = (46500/145000)*100.