Housing costs, auto loans, credit card payments, etc.
A calculation of your total living expenses, including housing costs, divided by your income
Lenders use back ratios as a guideline to see if you can qualify for a loan. It's important to note that back ratios vary from lender to lender and loan to loan.
To calculate your back ratio add up all of your monthly expenses, including student and car loans, credit card payments, as well as the expected housing costs. Housing costs are broken down into four parts - the loan's principal, the loan's interest, taxes and insurance. Then divide the total by your gross monthly salary.
Example: How do you calculate back ratio?
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Total monthly expenses Housing costs, auto loans, credit card payments, etc. |
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$1,000 | |
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Gross monthly income | ÷ | 4,000 | |||
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Back ratio | = | 25% | |
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Compare: Front ratio
More on: Back ratio