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Front End Ratio Formula:
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The Front End Ratio, also known as the housing expense ratio, is a financial metric used by lenders to assess a borrower's ability to manage mortgage payments. It calculates the percentage of a borrower's gross monthly income that goes toward PITI (Principal, Interest, Taxes, and Insurance) payments.
The calculator uses the Front End Ratio formula:
Where:
Explanation: The ratio expresses housing expenses as a percentage of gross monthly income, helping lenders evaluate mortgage affordability.
Details: Lenders typically prefer a Front End Ratio of 28% or less. A higher ratio may indicate that housing costs are too high relative to income, potentially affecting loan approval and terms.
Tips: Enter PITI and Income amounts in USD. Both values must be positive numbers. The calculator will compute the percentage of income used for housing expenses.
Q1: What is considered a good Front End Ratio?
A: Most lenders prefer a ratio of 28% or lower, though some programs may allow up to 31% or higher depending on other factors.
Q2: How does Front End Ratio differ from Back End Ratio?
A: Front End Ratio only considers housing expenses, while Back End Ratio includes all monthly debt obligations (credit cards, car loans, etc.).
Q3: Can I still get a mortgage with a high Front End Ratio?
A: It depends on the lender and your overall financial profile. Strong credit, substantial savings, or a low Back End Ratio may compensate for a higher Front End Ratio.
Q4: Does PITI include HOA fees?
A: Yes, if the property has homeowners association fees, they should be included in the PITI calculation.
Q5: Is gross or net income used for this calculation?
A: Lenders typically use gross monthly income (before taxes and deductions) for Front End Ratio calculations.