2026 Real Estate and Mortgage Terms Practice Test for Students

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Define debt-to-income (DTI) ratio and the front-end and back-end limits used in underwriting.

DTI measures a borrower's credit score.

DTI is the ratio of monthly housing expenses to gross income.

DTI is the percentage of income allocated to mortgage payments only.

DTI equals total monthly debts divided by gross monthly income; front-end relates to housing expenses, back-end includes all recurring debts.

Debt-to-income ratio measures how much of your gross monthly income goes toward debt payments. It helps lenders see how much of your income is already committed and whether there’s room for an additional loan. The front-end limit looks only at housing costs, comparing housing-related payments (like mortgage principal and interest, property taxes, and insurance) to gross income. The back-end limit includes all recurring debts—housing plus other monthly debts such as credit cards, car loans, and student loans—divided by gross income. In underwriting, these two ratios are used to gauge overall repayment ability, with front-end typically focusing on housing affordability and back-end reflecting total debt burden. A concise way to state it is: debt-to-income equals total monthly debts divided by gross monthly income, front-end relates to housing expenses, and back-end includes all recurring debts. For example, if gross monthly income is $5,000 and total monthly debt payments are $1,800, the back-end DTI is 36%; if housing payments are $1,400, the front-end housing ratio is 28%.