front end ratio definition

front end ratio

One of the ratios used by lenders in judging an applicant's capacity to pay back a home mortgage loan. It is the same as the back end ratio except that installments on the loans other than the applied-for loan and not taken into account. Lower this ratio is, the better qualified the applicant is for the loan. Also called front ratio. Formula: (Installment on the applied-for loan + Monthly portion of estimated property taxes + Monthly portion of estimated property insurance premium) ÷ Gross monthly income.

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