How this number is made
The front-end ratio is the housing payment divided by gross monthly income. Twenty-eight percent is a figure lenders have used as a guideline, not a law, and many approvals land on either side of it. The housing payment should include principal, interest, tax, insurance, and mortgage insurance if you want the ratio a lender would recognize.
- Gross income is before tax.
- Housing is the full monthly housing number, not principal and interest alone, if you are comparing yourself to the 28% guideline.
Formula
Ratio = housing payment ÷ gross monthly income.
Worked example
With the figures already in the form, housing ratio is 26.3%.
Questions
What is the back-end ratio?
Housing plus other debts, divided by income. The debt-to-income page is that broader number. This page is housing only.
Will I be approved under 28%?
Not necessarily. Credit, the loan program, and the rest of the debts still matter.