The term FHA front-end ratio is a term you will hear when going to apply for your FHA loan. Unfortunately, many times you are bombarded by a ton of financial jargon that doesn’t make a lot of sense to you. I don’t like that loan officers do that, but I can only be accountable for what I do, and how I treat people. I might use those terms too, but I will explain them; that’s just part of being a professional.
The front-end ratio is what the lender will use to qualify you for a loan, so that you know how much you can afford. The lender will take your monthly income, and what your proposed payment would be with principal, interest, taxes and insurance. This total payment can be no more than 31%. This is simply a guide, so that you aren’t getting overextended, although you may want a lower payment. It’s all about watching your cash flow, and doing what is best for you and your family.
The back-end ratio is what the lender looks at when including your new monthly mortgage payment, and all of your recurring debt every month. So, they look at your new monthly payment, plus your car payment and credit card payments, you can be at no more than 43%. This is important, and gets us back to the basics. With these guidelines in place, we shouldn’t be headed down the same path that we were headed down before. For more information on how you can qualify and to use my FHA calculator, please visit my website at www.fhaloansnow.net.
-Mayer Dallal
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