Debt to Income Ratios, Diving Deeper

Of all the important numbers to consider when applying for a home loan, one should be known at the start by homebuyers: your debt to income ratio.

Debt to income ratio, or DTI, is actually two numbers: a front-end ratio and a back-end ratio. These practical, helpful numbers are a dependable guide to helping you understand just how much home you can afford. If calculated and used correctly, debt to income ratios also can save you headaches once you begin paying off that brand new mortgage.

Both the front- and back-end ratios are used by mortgage lenders to help determine whether you'll be able to pay them back each month. But debt to income ratios are also critical for homebuyers to know because they present a simple way to step into the shoes of the lender early in the home-shopping process. They give you quick insight into which houses are within your reach financially. They are reality checks.