Posted on: 31st Oct, 2011 11:09 pm
I am planning to apply for mortgage and I hear a lot about ratios. Can anyone help me know what these front and back end ratios are all about?
Hi Jem,
When you apply for a mortgage, the lender will take a look at your debt to income ratio. The front end and back end ratios are a part of this debt to income ratio.
The front end ratio helps you and the lender know about the percentage of income that goes toward your housing costs - rent payments or your mortgage principal and interest, mortgage insurance premium, hazard insurance premium, property taxes, and homeowners' association dues.
The back end ratio is the percentage of income that goes toward paying all recurring debt payments. This may include your credit card payments, student loans, medical bills, child support, car loans and so on.
For conventional loans, the front end and the back end ratio should be 28/36 and for FHA loans, it should be 31/43.
Take care.
When you apply for a mortgage, the lender will take a look at your debt to income ratio. The front end and back end ratios are a part of this debt to income ratio.
The front end ratio helps you and the lender know about the percentage of income that goes toward your housing costs - rent payments or your mortgage principal and interest, mortgage insurance premium, hazard insurance premium, property taxes, and homeowners' association dues.
The back end ratio is the percentage of income that goes toward paying all recurring debt payments. This may include your credit card payments, student loans, medical bills, child support, car loans and so on.
For conventional loans, the front end and the back end ratio should be 28/36 and for FHA loans, it should be 31/43.
Take care.