The debt-to-income ratio (DTI) is a percentage that’s commonly used to evaluate the income qualifications for mortgage applicants. The DTI ratio is calculated by dividing the applicant’s payments by their gross monthly income. There are commonly two debt to income ratio for mortgage programs used.
What is the Front Ratio?
The ‘Front Ratio’ measures your proposed housing payment with principal, interest, taxes, and insurance (PITI) as a percentage of your total monthly income. The front end DTI ratio is also known as the ‘top ratio’ or ‘housing ratio’.
What is the Back Ratio?
The ‘Back Ratio’ measures the combined total of your proposed monthly payments as a percentage of your total monthly income. The back ratio includes your new home payment with principal, interest, taxes, insurance HOA dues and PMI, as well as any other installment obligations you may have such as credit card payments, car payments, student loan payments, or other revolving debt. The back end DTI ratio is also known as the ‘total debt ratio’ or ‘bottom ratio’.