What is a debt to income ratio?

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A debt to income ratio, commonly referred to as DTI, is the ratio of the amount of monthly expenses you have relative to your gross (before tax) income. 

 

The automated underwriter will look at two ratios when analyzing your DTI: your front end DTI ratio and your back end DTI ratio.

 

Front End DTI

 

The front end DTI is the ratio of your new housing payment including taxes and insurance relative to the amount of income you earn.  The front end DTI ratio excludes all other debts and simply analyzes your income relative to the payments on the new mortgage plus tax and insurance. 

 

So, if your mortgage payments including tax and insurance are $1,000 and you earn $4,000 per month in gross income, your front end DTI would be 25% ($1,000 / $4,000 = 25%). 

 

Generally, the automated underwriter likes to see front…

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