1. What is the Mortgage Front End Ratio?

The Front End Ratio (FER) is a key metric used by lenders to assess a borrower's ability to manage mortgage payments. It represents the percentage of a borrower's gross income that goes toward housing expenses, including mortgage payments, property taxes, insurance, and homeowners association fees.

2. How Does the Calculator Work?

The calculator uses the Front End Ratio formula:

Where:

• \( \text{Housing Costs} \) — Total monthly housing expenses ($)
• \( \text{Income} \) — Gross monthly income ($)

Explanation: The FER calculation helps determine what portion of income is dedicated to housing costs, which is crucial for mortgage affordability assessment.

3. Importance of FER Calculation

Details: Lenders typically prefer a Front End Ratio of 28% or less. A lower ratio indicates better financial stability and lower risk for the lender, while a higher ratio may signal potential payment difficulties.

4. Using the Calculator

Tips: Enter your total monthly housing costs and gross monthly income in dollars. Both values must be positive numbers. The calculator will compute your Front End Ratio percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good Front End Ratio?
A: Most lenders prefer a FER of 28% or less. Some programs may allow up to 31%, but lower ratios generally improve loan approval chances.

Q2: How does FER differ from Back End Ratio?
A: While FER considers only housing costs, Back End Ratio includes all debt obligations (housing costs plus other debts like car loans, credit cards, etc.).

Q3: What expenses are included in housing costs?
A: Typically includes mortgage principal and interest, property taxes, homeowners insurance, and any homeowners association (HOA) fees.

Q4: Can I get a mortgage with a high Front End Ratio?
A: It's possible but more challenging. Lenders may require stronger compensating factors like excellent credit, large down payment, or significant reserves.

Q5: Does FER include utilities and maintenance costs?
A: No, standard FER calculation only includes the housing expenses mentioned above. Utilities and maintenance are not typically considered by lenders in this ratio.