Home Loan Factors

~Debt-to-income Ratio ~

Did you know your debt-to-income (DTI) ratio can be as important as your credit score when trying to obtain a new home mortgage?  When speaking in terms of a mortgage, the DTI contains two numbers. The first is called the Front Ratio. This number relates specifically to the max amount of mortgage payment you will be able to comfortably afford based on your gross monthly income. The second number is called the Back Ratio. This number is the max total monthly obligation you can afford. Credit cards, car payments, student loans, child support and home mortgage are included in the back ratio. Utilities, telephone services, insurance and expenses for childcare are not included in the conventional loan back ratio.


     Conventional loans typically require a 28/36 DTI. Non-conventional (FHA/VA) allow for a higher ratio of up to 41% on the back ratio. Follow the basic formulas below to determine your front and back ratios. This information is valuable whether you are considering a new home purchase or simply trying to better manage your finances.



To determine your ideal DTI Front Ratio:

Gross monthly income x .28= Maximum mortgage payment


To determine your ideal DTI Back Ratio:

Gross monthly income x .36 = Total allowable payments


To determine your current DTI Front Ratio: 

(Monthly mortgage payment/ gross monthly income) x 100 = front %


To determine your current DTI Back Ratio: 

(All recurring debts/gross monthly income) x 100 = back %




Source: Bankrate.com