Debt to Income Ratios, often referred to as DTIs, are a key calculation used in the refinance, debt consolidation, and purchase mortgage application process. A debt to income ratio is arrived at by dividing your monthly debt payments by your pre-tax income. Debt to income ratios are finally used to determine how much money you can borrow, and a thorough knowledge of DTIs can help you get the most value from your refinance, debt consolidation or purchase mortgage transaction.
There are two different types of debt to income ratios which are used in refinance, debt consolidation or purchase mortgage underwriting, a Front End Ratio (or Front Ratio) and a Back End Ratio (or Back Ratio).
The Front Ratio is calculated by dividing the sum of your total monthly housing expenses, consisting of your mortgage payment including principal interest taxes and insurance as well as homeowners association fees, mandatory maintenance fees, common charges in a development and mortgage insurance if applicable.
The Back Ratio is similar to the front ratio, but on top of basic housing expenses the back end ratio also includes your other monthly debt payments, particularly...
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