Loan Qualifying Ratios and Calculations

What's included in a total debt ratio (a.k.a., debt-to-income ratio, total obligation, back-end ratio)?

All recurring (or installment) debt that will last longer than 10 months, such as monthly mortgage, car, credit, and loan payments

How do you calculate total debt ratio?

(Total of monthly debt obligations / monthly gross income) x 100

What's included in the housing ratio (a.k.a., front-end ratio)?

Monthly housing obligation, (principal, interest, taxes, insurance), homeowners or condo association fees

How do you calculate the housing ratio?

([Principal + interest + taxes + insurance + association fees] / monthly gross income) x 100

What's a loan-to-value (LTV) ratio?

Amount being borrowed compared to the value of a property (either the appraised value or sales price, whichever is less)

How do you calculate LTV?

(Amount financed / property value) x 100

What's a loan origination fee?

Fees charged by a lender for processing or originating a loan

How do you calculate a loan origination fee?

Loan amount x origination rate (divide a percentage by 100 to obtain the rate, so an origination fee of 2% is the same as 0.02)