LOWE'S FINANCIAL

Debt-to-income Ratios

When choosing a mortgage underwriter from outside your business, ensure that they have enough knowledge of debt to income ratios. These are calculations that underwriters utilize to determine whether a prospective home buyer is eligible for a loan. There are usually two types of calculations. The Front Ratio compares a borrower's expense to their income. They divide a borrower's total mortgage loan with their gross monthly income. The Back Ratio compares total monthly obligations to income. A reliable mortgage underwriter must be able to explain debt-to-income ratio issues to borrowers. For instance, they must explain why some aspects are included or not included in the total obligations or gross monthly income of a borrower.

Under total monthly payments, competent underwriters include all installment loans that have less than ten months remaining, co-signed loans, child support, any loan from a previous marriage, PITI (principle, interest, taxes and insurance) and all accounts, including credit cards'. Under gross monthly income, they include overtime, self-employed salary, bonuses, commission and child support contributions.