Investments glossary

Qualification Ratio

A qualification ratio notes the proportion of either debt to income or housing expense to income. Mortgage lenders use qualification ratios to determine a borrower’s creditworthiness for certain loan amounts. Generally, a borrower’s housing expenses alone, which includes any homeowner’s insurance, taxes and condominium fees, cannot exceed 28 percent of a borrower’s monthly gross income. The borrower’s debt-to-income ratio (DTI), which includes housing expenses plus debt, generally cannot exceed 36 percent of monthly gross income.

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