Which term is an alternative name for the Front-end ratio/DTI?

Which term is an alternative name for the Front-end ratio/DTI?

• A. Housing Expense Ratio
• B. Total Debt Ratio
• C. Net Income Ratio
• D. Mortgage Coverage Ratio

Answer: (A)

Front-end ratio is the portion of gross monthly income used for housing costs, so it’s commonly called the housing expense ratio. It isolates the housing payment (PITI) from any other debts, which is why lenders refer to it as the housing expense ratio. For example, if gross monthly income is $5,000 and housing costs are $1,500, the front-end ratio is 30%. This differs from the back-end ratio, which includes all monthly debts. The other terms don’t describe this housing-focused measure: total debt ratio is a label sometimes used for back-end DTI, net income ratio isn’t a standard mortgage metric, and mortgage coverage ratio relates to debt service coverage in different lending contexts.

Front-end ratio is the portion of gross monthly income used for housing costs, so it’s commonly called the housing expense ratio. It isolates the housing payment (PITI) from any other debts, which is why lenders refer to it as the housing expense ratio. For example, if gross monthly income is $5,000 and housing costs are $1,500, the front-end ratio is 30%. This differs from the back-end ratio, which includes all monthly debts. The other terms don’t describe this housing-focused measure: total debt ratio is a label sometimes used for back-end DTI, net income ratio isn’t a standard mortgage metric, and mortgage coverage ratio relates to debt service coverage in different lending contexts.