What are front and back ratios?

Guest 0.10 Dollars($)

Hi,
I hear about these different "ratios" when qualifying for a mortgage. What are front and back ratios?
Can anyone tell me about it.

Guest 0.10 Dollars($)

Ratio's. Points to your Debt to Income Ratio. Which should be around 50% in the subprime market and 40% or less in the A paper market.

[Edited by Samantha]

Guest 0.10 Dollars($)

Hi,

I would like to explain a bit more on what Matheno has commented.

Part of the mortgage application process will be the determination of how much house you can afford based on your income.

In that process the two ratios that will be computed are the front ratio and the back ratio.

A Front Ratio is the total mortgage payment including principal, interest, taxes and insurance (PITI) as well as any condominium or homeowner association fees divided by your total GROSS income. Traditionally this ratio must be below 28% . For example, With a gross income of $3700 per month, a total mortgage payment (PITI) of $973, the front ratio would be 26%.

While in a Back Ratio the total mortgage payment PLUS any car payments, credit card and any other loan payments is divided by your total GROSS income. Traditionally it must be below 36%. An example would be like, With a gross income of $3700 per month, a total mortgage payment of $973, a car payment of $212, 1 credit card payment of $59 and 1 credit card payment of $43 for a total of $1287 with a back ratio of 35%.

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