Glossary

Gross Monthly Income

This is your total stable and verifiable income before expenses, such as taxes, insurance premiums, etc., are deducted

Net Income

This is what is left of your gross income after taxes and insurance premiums. Essentially, this is your take home pay.
Monthly Installment Debt – This is an account which has a specific term (length of time to repay) and a set payment per month. Car loans and boat loans would be examples of installment debt.

Revolving Debt

Revolving debt included accounts where the balance may fluctuate each month and the monthly payment will also change. Charge cards would be examples of revolving debt.

Housing Debt Ratio

The Housing Debt Ratio is the percentage of gross monthly income that home buyers can allocate for principal, interest, taxes and insurance. Many lenders use percentages ranging from 25% to 28% as the maximum for the Housing Debt Ratio. Often referred to as the “front-end” ratio.

Total Debt Ratio

The Total Debt Ratio is the percentage of gross income that can be allocated to all monthly debts, including housing. This ratio would include things like car payments, finance company bills, credit card payments and any debt which has more than 11 payments left. The maximum percentages frequently used by lenders are 33% to 36%. Often referred to as the “back-end” ratio.
These are the fur parts of a mortgage payment commonly called “PITI”.
“P” – Principal
“I” – Interest
“T” – Taxes
“I” – Insurance (includes Hazard and Mortgage Insurance)