Component |
Description |
Total Monthly Debt Payments |
The total amount of debt payments made each month, including mortgage, credit card, car loans, etc. |
Gross Monthly Income |
The total monthly income before taxes and other deductions. |
Back-End Ratio |
The percentage of gross monthly income that goes toward paying debt obligations. |
Formula |
Back-End Ratio = (Total Monthly Debt Payments / Gross Monthly Income) × 100 |
Purpose |
Used to assess a borrower’s ability to manage monthly debt payments relative to their income, aiding in creditworthiness evaluation. |