What Is Front-End Ratio?
Front-End Ratio: Your new monthly housing payment divided by your gross monthly income.
Also called: housing ratio
The front-end ratio, or housing ratio, is the share of your gross monthly income that goes to the new housing payment: principal, interest, taxes, insurance, mortgage insurance and HOA dues.
How it works
Front-end ratio = housing payment ÷ gross monthly income.
A $2,000 payment on $7,000 of monthly income is a 28.6% front-end ratio.
Who uses it
- USDA uses it directly, with a guideline of about 29%.
- FHA has a 31% guideline, though automated approvals can go higher.
- Conventional loans focus on the total debt-to-income ratio rather than the housing ratio.
Good to know
Even when a program allows more, many financial planners suggest keeping housing near 28% to 30% of gross income so there's room for saving and repairs.