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Front End Ratio Formula:
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The Front End Ratio (FER), also known as the mortgage-to-income ratio, is a key metric used by lenders to determine mortgage qualification. It represents the percentage of a borrower's gross income that goes toward housing expenses.
The calculator uses the Front End Ratio formula:
Where:
Explanation: The equation calculates what percentage of your gross income is dedicated to housing expenses, which lenders use to assess mortgage affordability.
Details: Lenders typically prefer a Front End Ratio of 28% or less, though some programs may allow up to 31%. A lower ratio indicates better ability to manage mortgage payments and may improve loan approval chances.
Tips: Enter your total monthly housing costs (PITI) and your gross monthly income. Both values must be positive numbers. The calculator will show your Front End Ratio as a percentage.
Q1: What is considered a good Front End Ratio?
A: Most lenders prefer a ratio of 28% or lower, though some loan programs may accept up to 31%. Lower ratios generally indicate stronger financial position.
Q2: How does Front End Ratio differ from Back End Ratio?
A: Front End Ratio considers only housing expenses, while Back End Ratio includes all monthly debt obligations (credit cards, car loans, etc.).
Q3: Can I get a mortgage with a high Front End Ratio?
A: It's possible with strong compensating factors like excellent credit, significant savings, or low debt-to-income ratio, but generally more difficult.
Q4: Does this include homeowners association (HOA) fees?
A: Yes, if you're purchasing a property with HOA fees, these should be included in the PITI calculation as part of the housing expenses.
Q5: Is gross income before or after taxes?
A: Gross income is your total income before any deductions, including taxes, insurance, or retirement contributions.