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Do you know what are Debt-to-Income Ratios?

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Debt-to-income ratios are referred to as the guidelines that are used by mortgage lenders in order to determine your maximum mortgage amount. This is just a percentage of your monthly gross income (before taxes) that is used by you for paying your monthly debts.

Due to the reason that there are two calculations, so there is a “front” ratio and a “back” ratio. These two ratios are generally written in the following format: 33/38.

DebttoIncome

Front ratio

The front ratio is known as the percentage of your monthly gross income (before taxes) that is consumed in paying your housing costs. This housing cost includes principal, interest, taxes, insurance, mortgage insurance (when applicable) and homeowners association fees (when applicable).

Back ratio

The back ratio is also same as the front ratio, just that it also includes your monthly consumer debt.

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September 2011
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