What the terms front ratio & back ratio indicates to, as I frequently encounter them when looking for a mortgage program?
Before you are awarded a loan it is determined that of what scale a house you can afford and it is assessed through your present income. This process involves these two terms, front & back ratio. Front Ratio: It is the ratio of all the mortgage payments (PITI) that includes your taxes, principal amount, insurance, and condominium to your GROSS income. It should be under 28% mark, but is not compulsory. For an instance, if your income is $37000/month and your total mortgage payment is $973, and then your front ratio will end up being 26%. Back Ratio: It is the ratio of the sum of your total mortgage payment, credit card payments, car payments or any other kind of loan payments to your GROSS income. Its limit is up to 36%. For an instance, if your income is $37000month, your mortgage payment is $973, two credit card payment is $59 and & $43, car payment is $212 that adds up to $1287, and then your back ratio would be 35%.
