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.
The ratio of monthly housing costs (principal, insurance, taxes, and interest) plus regular monthly payments to gross monthly income, used by the lender to evaluate an applicant's qualification for a loan; typical back ratios are between 32 - 45 percent