When determining your maximum mortgage, lenders use what is known as a debt to income ration. A debt to income ration is calculated by taking your monthly income and comparing it to you how much you can pay your monthly debt. Your debt to income will be presented to you like this: 30/35. These are your front and back ratios.

Your front ratio is the percentage of your monthly income that can be used to pay for you housing costs. These include your mortgage payments, insurance, property taxes, and various other costs associated with owning a home.

Your back ratio is very similar to your front ration. However, unlike the front ratio, your back ratio also takes into account other factors, such as credit card debt, car payments, loan payments, and other expenses.

When analyzing your debt to income ratio, it is good to remember that the ideal front and back ratio is 33/38. When a lender sees this they will see that 33% of your monthly income is used to pay for housing. When other expenses are taken into account, a lender will see that 38% of your total monthly income is spent on housing costs as well as other debts.

Now for an example. If your monthly income is $10000 and the ideal debt to income ratio is 33/38, you monthly housing payments should be $3300, 33% of your total monthly income, and your total debt payments will be 38% of your monthly income, or around $3800.

Popularity: 9% [?]