What Are Front End Debt To Income Ratios?
Your monthly mortgage interest and principal, homeowners insurance, property taxes, mortgage insurance, and homeowners association dues, if any, divided by your total gross monthly income is what you call your front end debt to income ratios. The maximum amount allowed for a FHA Automated Approval on front end debt to income ratios for mortgage loan borrowers with credit scores higher than 620 FICO is 46.9% . Back end debt to income ratios are your total monthly payments, which is the sum of the front end debt to income ratios plus any other monthly payments which are minimum credit card monthly payments, student loan payments, automobile payments, and installment/revolving minimum monthly payments divided by the total monthly gross income of the mortgage loan borrower. The front end debt to income ratios do not include monthly utility payments, maintenance payments, or other housing expenses.
Front End Debt To Income Ratios; Can You Afford Your Monthly Housing Payment
There are many advantages of being a homeowner versus a renter, however, there are many disadvantages also. Many home buyers do not realize that things can go wrong on a home such as a furnace breakdown during sub zero degree weather, roof leaks, electrical issues, appliance malfunctions, plumbing problems, HVAC issues. These are high ticket items that once something goes wrong, you need to come out money out of pocket. If you barely qualify on a mortgage loan and your front end debt to income ratios are at 46.9% and your back end debt to income ratios are at 56.9%, chances are that you will be living pay check to pay check in making your monthly mortgage payments. You need to also consider the monthly utility bills as well as other housing expenses such as telephone, cable, and regular monthly maintenance when you are considering purchasing a new home. I strongly recommend that you have reserves in the event if something does go wrong. Your homeowners insurance will not cover unexpected repairs on your home so you need to keep in mind with having ample reserves, especially during the sub zero winter months.