Front-End Ratio:: Debt-To-Income Ratios
Front-End Ratio:: Debt-To-Income Ratios
Front-End Ratio:: Debt-To-Income Ratios
The standard debt-to-income ratios are the housing expense ratio and the
total debt-to-income ratio. These are also known as the front-end and backend ratios, respectively.
Front-end ratio: The housing expense, or front-end, ratio shows how
much of your gross (pretax) monthly income would go toward the mortgage
payment. As a general guideline, your monthly mortgage payment,
including principal, interest, real estate taxes and homeowners insurance,
should not exceed 28 percent of your gross monthly income. To calculate
your housing expense ratio, multiply your annual salary by 0.28, then divide
by 12 (months). The answer is your maximum housing expense ratio.
Front-end ratio
Take a homebuyer who makes $40,000 a year. The maximum amount for
monthly mortgage-related payments at 28 percent of gross income is $933.
loan and rate of home price appreciation, the transaction is structured so that
the loan amount will not exceed the value of the home over the life of the loan.
Often, the lender will require that there can be no other liens against the
home. Any existing liens must be paid off with the proceeds of the reverse
mortgage.
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