Cashtoons

Debt-Income Ratio 3

May 21, 2022

The back-end debt-to-income ratio takes all your monthly debt payments including your housing (and any insurance and taxes that is a part of your mortgage)

house

as well as your consumer debt, for these purposes this will include all your other debt, from student loans…

student loans

to car payments…

car

to credit cards…

credit card

even medical debt.

medical

Then you take this total monthly debt payment and divide it by your total gross monthly income. Financial counseling books tell would-be financial counselors that this number should be below 36%. It is not clear exactly where this number comes from, but it sounds high. More on this next week!

Sources:

sources

Financial Counseling by Dorothy B. Durband, Ryan H. Law, and Angela K. Mazzolini


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