How do you calculate DTI ratios?????

[MizzB]

Just wondering, how do you calculate DTI ratios? What bills are included? Anything thats on credit file? Lastly when I see DTI ratios such as 29/41 what does that mean? I'm new to the mortgage/loan terminology and I'm trying to get an understanding of what it means. Thanks.

[Anonymous]

Debt to Income ratio is computed by determining your:

 Front End Ratio - Your current MINIMUM monthly obligations without the new home - as they show on your credit report DIVIDED by your total monthly gross income

Back End Ratio - Your Front End Ratio obligations + whatever your new mortgage payment will be DIVIDED by your total monthly gross income

A DTI of, say, 29/41 means that the Front End Ratio is 29% and the Back End Ratio is 41%

Lenders have different requirements for DTI's ... and it all really depends on the lender AND your personal credit history / story.  I was able to get a loan with a Back End Ratio of 48%.

Message Edited by bubasti on 05-11-2009 01:48 PM

[MizzB]

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@Anonymous wrote:

Debt to Income ratio is computed by determining your:

 Front End Ratio - Your current MINIMUM monthly obligations without the new home - as they show on your credit report DIVIDED by your total monthly gross income

Back End Ratio - Your Front End Ratio obligations + whatever your new mortgage payment will be DIVIDED by your total monthly gross income

A DTI of, say, 29/41 means that the Front End Ratio is 29% and the Back End Ratio is 41%

Lenders have different requirements for DTI's ... and it all really depends on the lender AND your personal credit history / story.  I was able to get a loan with a Back End Ratio of 48%.

Message Edited by bubasti on 05-11-2009 01:48 PM

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Thanks -- this really helps. I've been reading the post in this forum trying to increase my knowledge as I rebuild and prepare to apply for a mortgage and that was one of the areas I just wasn't clear on.