A borrower has gross monthly income of $7,200. Their housing payment will be $2,016 and they have $720 in other monthly debt payments. What are their front-end and back-end DTI ratios?
Correct Answer
A) Front-end: 28%, Back-end: 38%
Front-end DTI = $2,016 ÷ $7,200 = 28%. Back-end DTI = ($2,016 + $720) ÷ $7,200 = $2,736 ÷ $7,200 = 38%. Front-end only includes housing costs, while back-end includes all recurring monthly debt obligations.
Why This Is the Correct Answer
Front-end DTI = $2,016 ÷ $7,200 = 28%. Back-end DTI = ($2,016 + $720) ÷ $7,200 = $2,736 ÷ $7,200 = 38%. Front-end only includes housing costs, while back-end includes all recurring monthly debt obligations.
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