Q:

What is a good debt-to-total-assets ratio?

A:

Quick Answer

In calculating a person's eligibility for a mortgage, which is one of the most common reasons for calculating a personal debt-to-income ratio, lenders prefer to see a number lower than 28 percent on the back end and under 36 percent on the front end. About.com defines those terms as being your total debt ratio before and after housing costs are factored in to the equation.

Continue Reading

Full Answer

About.com describes the method for calculating your debt-to-income ratio. Simply gather together and add up all of your monthly bills. If you have quarterly or annual debts, average them out over 12 months and add them to your monthly payments. Once you have that number, the total amount you have to pay out in a month, divide it by your total monthly income, again with quarterly or annual bonuses factored in to the number. The resulting number is your debt-to-income ratio.

Lenders look at two numbers when assessing your creditworthiness. The first, according to About.com, is the pre-housing cost of living, called the "back end." This number should be less than 28 percent. The "front end" is your overall ratio once housing costs are included. Ideally, this is less than 36 percent of your month-over-month income, indicating that you are fundamentally solvent and can afford to take on the obligation of a mortgage.

Learn more about Financial Planning

Related Questions

  • Q:

    What are probate assets?

    A:

    Probate assets refer to three specific types of assets listed in a person's will that are owned by the individual's estate upon his death. These include individual assets, tenants in common property and beneficiary assets with a predeceased person or no beneficiary.

    Full Answer >
    Filed Under:
  • Q:

    How do you challange an executor of a will?

    A:

    The individual who is interested in challenging the executor of a will must initiate a court proceeding, and the person doing so must have an interest in the assets of the estate, says Free Advice. The interested person is usually beneficiaries to the will or a creditor of the estate.

    Full Answer >
    Filed Under:
  • Q:

    What is a trustor?

    A:

    A trustor is a person who creates a trust by contributing funds or assets to the trust, according to Investopedia. Other common terms that refer a trustor include a settlor or a donor.

    Full Answer >
    Filed Under:
  • Q:

    How does a living trust work?

    A:

    A living trust is a legal, written document that details the assets a person wishes to place in the trust and includes instructions on how the assets should be distributed after the person's death, explains LegalZoom. The trust allows the ownership to remain with a person until his death.

    Full Answer >
    Filed Under:

Explore