Which statement best describes the front-end debt-to-income (DTI) ratio?

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Multiple Choice

Which statement best describes the front-end debt-to-income (DTI) ratio?

Explanation:
Front-end DTI measures how much of a borrower’s income goes to housing costs. The numerator is the housing payment, typically the PITI amount (principal, interest, taxes, and insurance, plus any HOA dues), and the denominator is gross monthly income (pre-tax). This ratio shows what portion of income is dedicated to housing itself, independent of other debts. That’s why the statement describing housing payment as a percentage of gross monthly income is the correct description of the front-end DTI. By contrast, the back-end DTI uses total monthly debt payments divided by gross income, and other options that use net income would describe different metrics.

Front-end DTI measures how much of a borrower’s income goes to housing costs. The numerator is the housing payment, typically the PITI amount (principal, interest, taxes, and insurance, plus any HOA dues), and the denominator is gross monthly income (pre-tax). This ratio shows what portion of income is dedicated to housing itself, independent of other debts. That’s why the statement describing housing payment as a percentage of gross monthly income is the correct description of the front-end DTI. By contrast, the back-end DTI uses total monthly debt payments divided by gross income, and other options that use net income would describe different metrics.

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