Ratios, Front End & Back End

Q.  I hear mortgage bankers and brokers refer to front end and back end ratios.   
      What are you folks talking about?

 A.  Front-end ratios refer to a borrower’s housing expense (mortgage
       payment, taxes and insurance) divided by the borrower’s gross income.    
       Lenders like to see this number in the range of 28-30%.

  A back-end ratio is one’s housing expense plus consumer debt divided,      
  again, by gross income.  On the low side, some banks won’t allow this figure
  to exceed 38% but, depending on the loan program, “A paper” lenders will
  go as high as 45%.  Sub-prime lenders will allow a Debt To Income ratio
  (DTI) of 50% or even 55% in some instances.

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