Front-End Ratio

Front-End Ratio
A ratio that indicates what portion of an individual's income is used to make mortgage payments. It is calculated as an individual's monthly housing expenses divided by his or her monthly gross income and is expressed as a percentage. Monthly gross income is simply annual income divided by 12 (months). Lenders use the front-end ratio in conjunction with the back-end ratio to approve mortgages.

Calculated as:

Front-End Ratio

For example, if your annual income is $60,000, your monthly income is $5,000(60,000/12). By asking your lender what front-end ratio would be required in order for your mortgage to be approved, you can figure how much of that $5,000 you can allocate to your mortgage payments. If the required front-end ratio is 31%, you can allocate $1,550 (5,000 x 0.31). Thus, if your PITI is $1,550 or less, you would be approved.

Typical monthly housing expenses include the mortgage principal, interest, taxes and insurance payments - collectively known as PITI.


Investment dictionary. . 2012.

Игры ⚽ Поможем написать курсовую

Look at other dictionaries:

  • Back-End Ratio — A ratio that indicates what portion of a person s monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI), credit card payments, child support and other loan payments. Lenders use… …   Investment dictionary

  • Front-End Debt-to-Income Ratio - DTI — A variation of the debt to income ratio (DTI) that calculates how much of a person s gross income is going towards housing costs. If a homeowner has a mortgage, the front end DTI ratio is usually calculated as housing expenses (such as mortgage… …   Investment dictionary

  • Debt-to-income ratio — A debt to income ratio (often abbreviated DTI) is the percentage of a consumer s monthly gross income that goes toward paying debts. (Speaking precisely, DTIs often cover more than just debts; they can include certain taxes, fees, and insurance… …   Wikipedia

  • Civilian casualty ratio — In armed conflicts, the civilian casualty ratio (also civilian death ratio, civilian combatant ratio, etc.) is the ratio of civilian casualties to combatant casualties, or total casualties. The measurement can apply either to casualties inflicted …   Wikipedia

  • Eastern Front (World War II) — Great Patriotic War redirects here. For a discussion of the term itself, see Great Patriotic War (term). Not to be confused with Patriotic War of 1812. Eastern Front Part of World War II …   Wikipedia

  • Nidaros Cathedral West Front — Nidaros Cathedral West Front. The Nidaros Cathedral West Front (Nidarosdomens Vestfront), which includes multiple sculptures, was the final portion of the Nidaros Cathedral in Trondheim, Norway that was restored. This is the cathedral s main… …   Wikipedia

  • Mobile Suit Gundam: Zeonic Front — Developer(s) Sunrise Interactive Publisher(s) Bandai …   Wikipedia

  • Qualifying Ratios — A set of ratios that are used by lenders to approve borrowers for a mortgage. The borrower s front end ratio, which is the total housing expense compared to the borrower s gross monthly income, is compared to the borrower s back end ratio, which… …   Investment dictionary

  • Mutual fund — This article is about mutual funds in the United States. For other forms of mutual investment, see Collective investment scheme. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors… …   Wikipedia

  • Mutual fund fees and expenses — are charges that may be incurred by investors who hold mutual funds. Running a mutual fund involves costs, including shareholder transaction costs, investment advisory fees, and marketing and distribution expenses. Funds pass along these costs to …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”