Debt To Income Worksheet printable pdf download

DEBT TO INCOME RATIO TIP SHEET

Calculating Debt to Income (DTI) Ratios

One of the fundamental steps in the foreclosure intervention counseling process is determining

whether or not a situation will allow a homeowner to retain the home or need to transition to other

housing.

In order to retain the home, the housing costs must be affordable and sustainable.

DTI ratios help make that determination.

Ratios can also be a basis for educating the homeowner during budget counseling, especially

when explaining why a situation may be unaffordable and will lead to transition. Ultimately, DTI

ratios help determine the foreclosure intervention tool that is most appropriate for a homeowner.

HAMP uses two debt to income ratios:

1. Monthly Mortgage Payment DTI Ratio (Payment DTI)

2. Total Debt to Income Ratio (Total DTI)

The Payment DTI is also commonly referred to as “the front end ratio”. This ratio expresses the

percentage of the homeowner’s monthly income that is used for the mortgage payment. To

determine the Payment DTI, the homeowner’s gross monthly income is divided by the mortgage

payment. HAMP guidelines consider a 31% payment ratio as an affordable payment and the goal

of the program is to get homeowner mortgage payments as close to 31% as possible without

going below that ratio. (Note- DTI ranges from 25%-42% for Tier 2 expanded DTI.)

Total DTI is commonly known as the back end ratio.

It expresses the percentage of the

homeowner’s monthly income that is used for the mortgage payments and all other debt. The

other debt considered includes the same monthly debt as the housing ratio plus all other monthly

installment debt payments, such as all other mortgage loans, auto, student, and consumer loans;

and all revolving debt, such as credit cards.

To determine the Total Debt DTI, the homeowner’s gross income is divided by the total of the

mortgage debt and all other debt. If a total debt DTI is over 55%, the homeowner is required to

attend counseling with a HUD certified counseling agency.

This “over 55%” counseling is

commonly known as Level 4 counseling and the counseling agency may receive funding for this

counseling through NFMC.

The Debt to Income Worksheet is found on the following page and includes descriptions of what

should be included in each DTI calculation.

Debt To Income Worksheet