Total Obligations Ratio Calculation

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FLORIDA REAL ESTATE SALES ASSOCIATE COURSE

Types of mortgages

Section 7 of 72

The total obligations ratio, or "back-end ratio," provides a broader view of the borrower's financial health. This calculation takes the total housing expense (PITI) and adds all other recurring monthly debts, such as car payments, student loans, and credit card minimums. This sum is divided by the gross monthly income. For conventional loans, lenders generally look for a ratio no higher than 36%, although this can sometimes go higher if the borrower has a very strong credit score or substantial cash reserves.