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Front Ratio vs Back Ratio
Lenders determine your ability to afford the mortgage payment based on your monthly housing expenses compared to your gross monthly income is called the front ratio. Your total monthly expenses compared to your gross monthly income is called the back ratio. Mortgage underwriting standards can vary by loan product.
So the principal, interest,taxes and insurance, known as PITI, on your mortgage loan shouldn't exceed 28 percent of your monthly pretax income, and all monthly loan obligations including the mortgage shouldn't exceed 36 percent of your montly pretax income. A lender can often be more flexible on the back ratio than it can be on the front ratio. Be sure to check because often there can be more flexibility.
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