7.3B Front and Back End Ratios Worksheet

Front

What is the front-end ratio?

Back

The front-end ratio is a measure of a borrower's housing costs (including mortgage payments, property taxes, and insurance) compared to their gross monthly income. It is typically expressed as a percentage.

Front

What is the back-end ratio?

Back

The back-end ratio is a measure of a borrower's total monthly debt payments (including housing costs and other debts like credit cards and car loans) compared to their gross monthly income. It is also expressed as a percentage.

Front

How do you calculate the front-end ratio?

Back

Front-end ratio = (Total housing costs / Gross monthly income) x 100.

Front

How do you calculate the back-end ratio?

Back

Back-end ratio = (Total monthly debt payments / Gross monthly income) x 100.

Front

What is considered a good front-end ratio for mortgage approval?

Back

A front-end ratio of 28% or less is generally considered acceptable for mortgage approval.

Front

What is considered a good back-end ratio for mortgage approval?

Back

A back-end ratio of 36% or less is typically considered acceptable for mortgage approval.

Front

What components are included in the front-end ratio?

Back

The front-end ratio includes monthly mortgage payments, property taxes, and homeowner's insurance.

Front

What components are included in the back-end ratio?

Back

The back-end ratio includes all monthly debt payments, such as mortgage payments, property taxes, homeowner's insurance, credit card payments, and car loans.

Front

If a borrower has a gross monthly income of $5,000 and their monthly housing costs are $1,200, what is their front-end ratio?

Back

Front-end ratio = (1200 / 5000) x 100 = 24%.

Front

If a borrower has a gross monthly income of $5,000 and their total monthly debt payments are $2,000, what is their back-end ratio?

Back

Back-end ratio = (2000 / 5000) x 100 = 40%.