Posted on: 10th Dec, 2010 03:23 am
Could someone PLEASE explain a front ratio and a back ratio? and what are mortgage points?
Hi shethystuckey,
You should note that a debt-to-income ratio is the percentage of a consumer's monthly gross income which is used for paying debts. There are two main kinds of DTI. The first DTI is known as front-end ratio and the second DTI is known as back-end ratio.
The front-end ratio indicates the percentage of income which is used for housing costs, rent amount for the tenant and mortgage principal and interest, mortgage insurance premium for the borrower, hazard insurance premium, property taxes, and homeowners' association dues.
The back end ratio includes the percentage of income that goes toward paying all recurring debt payments - student loan payments, child support payments, alimony payments.
For conventional loans, the required DTI is 28/36. Here, the front end ratio is 28 and back end ratio is 36.
You should note that a debt-to-income ratio is the percentage of a consumer's monthly gross income which is used for paying debts. There are two main kinds of DTI. The first DTI is known as front-end ratio and the second DTI is known as back-end ratio.
The front-end ratio indicates the percentage of income which is used for housing costs, rent amount for the tenant and mortgage principal and interest, mortgage insurance premium for the borrower, hazard insurance premium, property taxes, and homeowners' association dues.
The back end ratio includes the percentage of income that goes toward paying all recurring debt payments - student loan payments, child support payments, alimony payments.
For conventional loans, the required DTI is 28/36. Here, the front end ratio is 28 and back end ratio is 36.