Mortgages & Loans
What Is The Mortgage Debt To Income Ratio ?
The mortgage debt to income ratio is the percentage of a person's monthly earnings used to pay off all debt obligations. Lenders usually consider two ratios when making a loan. The ratios are constructed in different ways. The first is called the front-end ratio. It is the ratio of the monthly housing expenses including principal, interest, property taxes and insurance and that amount is compared to the borrower's gross monthly income. The second is called the back-end ratio. It is when a borrower's other debts, such as auto loans and credit cards are taken into account. Lenders usually look at both ratios to determine an acceptable ratio. Some lending institutions take into account only the back-end ratio.
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