Posted: Wed Jun 30, 2004 2:25 am Post subject: Housing Expense Ratio
Housing Expense Ratio or Front-End Ratio calculates how much of your gross monthly income will be used to make mortgage payment. It is evaluated as an individual's monthly housing expense or mortgage payment divided by his monthly gross income. It is expressed in terms of percentage.
To Sum up,
Quote:
Housing Expense Ratio = Monthly Housing Expense / Monthly Gross Income
Where, Housing expenses include principal, interest, real estate taxes, and homeowners insurance collectively known as PITI.
In general, your total housing expense ratio or front-end ratio should not exceed 28% of your gross income.
For Example, A home-buyer makes $1,20,000 a year. The maximum amount of monthly mortgage-related payment at 28% of gross income would be $2,800. Thus, the homebuyer would be approved for a mortgage which requires a maximum monthly mortgage payment of $2,800.
haley Sytsma Guest
Posted: Fri Oct 24, 2008 10:11 am Post subject: housing expense ratio
i need this for an assignment at school but i dont understand it!
Housing expense ratio is used to calculate a person's monthly mortgage payments. These payments depend on the gross monthly income. This is also known as front end ratio.
To calculate the Housing expense ratio, you will need the following formula:
Housing Expense Ratio = Monthly Housing Expense / Monthly Gross Income
The monthly housing expense in this formula includes principal amount , real estate taxes, interest as well as the homeowners insurance. Generally it is said that the housing expense ration should not exceed 28% of a person's gross monthly income.
Sam
