Enter the total mortgage payments, including PITI ($) and the total income ($) into the Front-End Ratio Calculator. The calculator will evaluate and display the Front-End Ratio.
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Front-End Ratio Formula
The following formula is used to calculate the Front-End Ratio.
FER = M / I * 100
- Where FER is the Front-End Ratio (%)
- M is the total mortgage payments including PITI ($)
- I is the total income ($)
To calculate the front-end ratio, divide the mortgage payments by the total income, then multiply by 100 to express the result as a percent.
How to Calculate Front-End Ratio?
The following example problems outline how to calculate Front-End Ratio.
Example Problem #1:
- First, determine the total mortgage payments including PITI ($).
- The total mortgage payments including PITI ($) is given as: 3,000.
- Next, determine the total income ($).
- The total income ($) is provided as: 10,000.
- Finally, calculate the Front-End Ratio using the equation above:
FER = M / I * 100
The values given above are inserted into the equation below and the solution is calculated:
FER = 3,000 / 10,000 * 100 = 30.00 (%)
FAQ
What does PITI stand for in mortgage payments?
PITI stands for Principal, Interest, Taxes, and Insurance. It represents the total monthly obligations homeowners have when paying back a mortgage. This includes the loan’s principal and interest payments, property taxes, and homeowner’s insurance.
Why is the Front-End Ratio important for homebuyers?
The Front-End Ratio is crucial for homebuyers because it helps lenders determine a borrower’s financial capability to manage monthly housing expenses. A lower Front-End Ratio indicates that a smaller portion of income goes towards housing costs, making it easier for individuals to qualify for a mortgage.
What is considered a good Front-End Ratio?
A good Front-End Ratio typically falls at or below 28%. This means that no more than 28% of your gross monthly income should go towards your mortgage payment, including PITI. Lenders use this benchmark to ensure borrowers have enough income left for other expenses after paying their mortgage.
