What are front-end and back-end DTI ratios?
Lenders typically take both ratios into consideration, though your back-end ratio is likely to carry more weight in the approval process:
- Front-end DTI ratio. This includes all expenses directly related to your home, such as property taxes, insurance and the payments you’ll make on the home you’re trying to buy. Those expenses are tallied up by the lender, then divided by your gross monthly income.
- Back-end DTI ratio. The back-end ratio includes any debts that are likely to show up on your credit report. This can include revolving debts like car loans, credit cards and student or personal loans.