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Debt Ratio
Gross monthly payments divided by gross monthly income, expressed as a percentage.
There are typically two debt ratios to be considered: Housing ratio-sometimes called the front ratio-is the total monthly house payment plus any monthly tax, insurance, private mortgage insurance, or homeowners association dues, divided by gross monthly income.
The total debt ratio-also called the back ratio-is the total housing payment plus other monthly consumer installment or revolving debt, also expressed as a percentage. Loan debt-ratio guidelines are usually denoted as 32/ 38, with 32 being the front ratio and the 38 being the back ratio.
Ratio guidelines can vary from loan to loan and lender to lender.
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