There are
two qualifying
ratios
to
consider. We call these ratios Front
and Back. Guidelines restrict the
cost of housing and the cost of housing + debt to a maximum percentage of your Gross Monthly Income
.
a.
The FRONT
RATIO
is the HOUSING
EXPENSE. The housing expense
includes the Principal & Interest
, monthly Taxes
, monthly Hazard Ins., monthly PMI
&
monthly Association Dues (if a Condo). This
total is "divided" by Gross Monthly Income
. When
you perform this on your calculator
,
your calculator will give you a percentage, such as .28.
"Housing
expense to income" (front ratio
)
maximum is 28%. This ratio can
be exceeded with compensating factors (i.e., good credit
, accumulated savings, debt free, large down
payment
, probability of increased earnings, substantial
net worth or rent
paid
by family member. The rent paid by a
family member is NOT to be considered as a stable income but may justify
slightly higher ratios
.
b.
The BACK
RATIO is the HOUSING EXPENSE + ALL DEBT
obligations. This total is also
divided by Gross Monthly Income
. Performed
on your calculator
the
result will yield results like the front ratio
,
such as .36.
The maximum
"back" ratio
is
36%.
The Back Ratio may be
extended with compensating factors.
For more
information or a FREE prequalification,
Licensed Mortgage Banker - New Jersey Department of Banking and Insurance; Licensed by the Pennsylvania Department of Banking; Virginia Licensed Mortgage Lender