Debt to income ratio

You've probably heard this term tossed around a bunch and maybe never really explained. Debt-to income ratio is used by lenders to qualify a borrower for how much they can afford. Quite simply it's as it sounds, the lender takes your debt and divides it by the monthly gross income you make and thats your DTI.
The lender will take and break it into 2 ratios, the front end and back end ratio. Front end ratio is just your montly housing costs which include principle, interest, taxes and home insurance. The back end ratio includes all your other consumer debt. (ie car payments, credit card payments, student loans, etc).
In general lenders are concerned with the back end ratio. Also in General they will lend on a back end ratio between 38 and 50%. The specific back end ratio guidelines vary from lender to lender and product to product. The guidelines can be flexible as Compensating Factors are condsidered. Ie, if an applicant has higher credit and a lot of equity the Fannie Mae underwriting system may allow a higher DTI than someone who has little equity and lower credit.
As a quick example if someone has a monthly income of 8,000, their back end ratio (total amount of expenses) can be 3040 at 38%DTI or 4,000 at 50%DTI.