Credit Card Glossary: Terms and Definitions
Qualifying ratios are ratios lenders use to assess a loan applicant’s ability to meet debt obligations. They are most commonly used in mortgage underwriting. They include a front end ratio, which is a percentage of monthly income before tax that is used for a house payment; and a back end ratio, which is the percentage of income compared to the combined monthly debt from house, car, credit card and student loan payments. Whether a ratio is acceptable can fluctuate from lender to lender and vary with market conditions, but if the ratios of debt to income are too high, an applicant won’t be approved for a loan.