What is a measurement used to assess the total percentage of debts to monthly income?

The measurement used to assess the total percentage of debts to monthly income is known as the Back End Ratio. This ratio focuses on the borrower's total debt obligations, including all monthly debt payments (such as car loans, credit card payments, and mortgage payments) divided by their gross monthly income.

This metric is crucial in the mortgage lending process because it provides lenders with insight into a borrower’s overall financial obligation relative to their income level. A lower Back End Ratio indicates that a borrower has a healthier financial position, increasing the likelihood of being approved for a mortgage loan. By assessing this ratio, lenders can determine how much of a borrower’s income is being consumed by debt, ensuring that they are able to manage their financial commitments without becoming overleveraged.

The other ratios listed serve different purposes: the Front End Ratio assesses only housing expenses relative to income, the Debt Coverage Ratio measures the ability to cover debt obligations with income (commonly used in commercial lending), and the Loan to Value Ratio evaluates the amount of a loan compared to the value of the property. Each has its own specific relevance in assessing a borrower's financial situation but does not measure the total percentage of debts to income like the Back End Ratio does.