Definitions for "Back-end Ratio"
Keywords:  piti, gross, crucial, ratio, monthly
A lender calculation that compares a borrower's total debt (principal, interest, property taxes, and insurance, plus other monthly debt payments) to gross monthly income.
(i.e., debt ratio) A calculation used by the lender to determine if the amount of income less debt is sufficient to afford the monthly payment. It is calculated by taking the monthly mortgage payment (PITI) and dividing it by the sum of the gross monthly income minus the total monthly debt payments of the applicant. The maximum ratio varies from 32% to 40%, depending on the loan and program applied for. In other words, no more than 40% of the applicant's income less debt should be set aside for the monthly mortgage payment.
See Total Debt Ratio.