Front-End Debt-to-Income Ratio - DTI

Front-End Debt-to-Income Ratio - DTI: A variation of the debt-to-income ratio (DTI) that calculates how much of a person's gross income is going towards housing costs. If a homeowner has a mortgage, the front-end DTI ratio is usually calculated as housing expenses (such as mortgage payments, mortgage insurance, etc.) divided by gross income. In contrast, a back-end DTI calculates the percentage of gross income going towards other types of debt like credit card or car loans.
To qualify for a mortgage, the borrower often has to have a front-end DTI ratio less than an indicated level. Higher ratios tend to increase the likelihood of default on the mortgage. For example, in 2009 many homeowners had front-end DTIs that were significantly higher than average, and consequently mortgage defaults began to rise. In 2009 the government introduced loan modification programs in an attempt to get front-end DTI's below 31%.

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Debt-to-income ratio — A debt to income ratio (often abbreviated DTI) is the percentage of a consumer s monthly gross income that goes toward paying debts. (Speaking precisely, DTIs often cover more than just debts; they can include certain taxes, fees, and insurance… … Wikipedia
Loan modification in the United States — Loan modification, the systematic alteration of contactual mortgage loan agreements, has been practiced in the United States since the 1930s. During the Great Depression loan modification programs took place at the state level in an effort to… … Wikipedia
Home Affordable Modification Program - HAMP — A loan modification program introduced in 2009 to promote stability in the housing market. The Home Affordable Modification Program (HAMP) was aimed at helping homeowners who were devoting more than 31% their of gross income toward mortgage… … Investment dictionary

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