Affordability and Qualification

Mortgage qualification terms that explain income ratios, credit strength, and the lender's view of repayment capacity.

Back-end ratio compares housing cost plus other recurring monthly debt obligations to gross monthly income.

CLTV compares all mortgage debt secured by the property with the home's value, not just the first mortgage.

Credit score is a numeric summary of credit behavior that lenders use as one input in mortgage approval and pricing.

Down payment is the portion of the home's price the borrower pays upfront instead of financing.

DSCR compares property cash flow with debt obligations and is often used in mortgage contexts where rental income drives qualification.

DTI compares monthly debt obligations to gross monthly income to show how heavy the borrower's recurring debt load is.

Front-end ratio compares housing-related monthly expense to gross monthly income.

Gift funds are money given to the borrower for mortgage-related costs such as down payment or closing expenses, subject to lender rules.

A gift letter is the lender-requested document stating that funds provided to the borrower are a gift rather than a loan.

Homeowners association dues are recurring charges paid to an HOA that lenders often count when evaluating mortgage affordability.

LTV compares the mortgage amount with the home's value to show how much leverage is being used in the deal.

Preapproval is a stronger lender review indicating the borrower appears to qualify under an identified mortgage framework.

Prequalification is an early estimate of mortgage fit based on preliminary borrower information rather than full underwriting.

Reserve requirements are lender expectations that the borrower still has enough cash or liquid assets after closing.