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Definition of 'Qualifying Ratios'
A set of ratios that are used by lenders to approve borrowers for a mortgage. The borrower's front-end ratio, which is the total housing expense compared to the borrower's gross monthly income, is compared to the borrower's back-end ratio, which comprises of the total housing expense and other consumer debt compared to the borrower's gross monthly income. The front-end ratio is generally limited to a maximum of 28% and the back-end ratio is generally limited to 35%. However, both ratios change with market conditions and may be influenced by other risk factors (such as the loan-to-value ratio of the mortgage).
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