Front-End Debt-to-Income Ratio - DTI
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Definition of 'Front-End Debt-to-Income Ratio - DTI '
A variation of the debt-to-income ratio (DTI) that calculates how much of a person's gross income is going towards housing costs. If a homeowner has a mortgage, the front-end DTI ratio is usually calculated as housing expenses (such as mortgage payments, mortgage insurance, etc.) divided by gross income. In contrast, a back-end DTI calculates the percentage of gross income going towards other types of debt like credit card or car loans.
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Investopedia explains 'Front-End Debt-to-Income Ratio - DTI '
To qualify for a mortgage, the borrower often has to have a front-end DTI ratio less than an indicated level. Higher ratios tend to increase the likelihood of default on the mortgage. For example, in 2009 many homeowners had front-end DTIs that were significantly higher than average, and consequently mortgage defaults began to rise. In 2009 the government introduced loan modification programs in an attempt to get front-end DTI's below 31%.
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Search results for 'Front-End Debt-to-Income Ratio (DTI)'
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http://www.investopedia.com/articles/mortgages-real-estate/10/ready-to-buy-house.asp
... However, you also need to factor in the front-end debt-to-income ratio (DTI), the
monthly debt you will have to incur from housing expenses alone. ...
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http://www.investopedia.com/articles/pf/05/030905.asp
... Front-End Ratio The front-end ratio is the percentage of your yearly ... The back-end
ratio, also known as the debt-to-income ratio (DTI), calculates the ...
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