Front-end DTI vs back-end DTI definitions.

Front-end DTI vs back-end DTI definitions.

• A. Front-end DTI is housing costs (PITI) divided by gross monthly income; back-end DTI is total monthly debt payments divided by gross monthly income.
• B. Front-end DTI is total debt divided by net income.
• C. Front-end DTI is housing costs divided by net income.
• D. Back-end DTI is only a percent of gross income.

Answer: (A)

DTI measures how much of a borrower’s income goes toward debt each month. The front-end, or housing, ratio looks at housing costs only—PITI (principal, interest, taxes, and insurance)—divided by gross monthly income. The back-end ratio considers all monthly debt payments (credit cards, student loans, car loans, etc.) divided by gross monthly income. This framing helps lenders assess both housing affordability and overall debt burden relative to income. So the statement that front-end DTI is housing costs (PITI) divided by gross monthly income and back-end DTI is total monthly debt payments divided by gross monthly income is the correct one. The other descriptions mix up whether gross versus net income is used or omit the requirement to include all monthly debt payments.

DTI measures how much of a borrower’s income goes toward debt each month. The front-end, or housing, ratio looks at housing costs only—PITI (principal, interest, taxes, and insurance)—divided by gross monthly income. The back-end ratio considers all monthly debt payments (credit cards, student loans, car loans, etc.) divided by gross monthly income. This framing helps lenders assess both housing affordability and overall debt burden relative to income. So the statement that front-end DTI is housing costs (PITI) divided by gross monthly income and back-end DTI is total monthly debt payments divided by gross monthly income is the correct one. The other descriptions mix up whether gross versus net income is used or omit the requirement to include all monthly debt payments.