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back-end ratio
(redirected from back end ratio)

   Also found in: Acronyms 0.01 sec.
Back-End Ratio
In loans, the portion of a person's gross income that goes toward debt service. It is calculated by dividing all monthly debt payments by one's gross monthly income. Lenders use the back-end ratio when determining whether to extend credit to an individual. Some lenders use it in conjunction with the front-end ratio, while others consider the back-end ratio exclusively. The lower one's back-end ratio is, the more likely one is to receive a loan. Generally speaking, lenders do not make loans to a person with a back-end ratio of more than 0.36, but they make exceptions for good credit.

back-end ratio

One method of analyzing a borrower's ability to meet underwriting requirements for a home loan.This method takes into account existing long-term debt of the applicant, plus the payments on the requested loan,in order to arrive at a percentage of income that will be devoted to debt service. Lenders typically like to see ratios below 36 percent of take-home pay. Contrast with front-end ratio,which compares only the requested loan against take-home pay.



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There are two different types of debt to income ratios which are used in refinance, debt consolidation or purchase mortgage underwriting, a Front End Ratio (or "Front Ratio") and a Back End Ratio (or "Back Ratio").
The back end ratio is determined by dividing the PITI combined with the debt, by the gross monthly income.
This number is used for the back end ratio, or debt to income ratio, to make sure your total debt does not exceed 36% of your monthly income.
 
 
 
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