Definition
Front-end ratio (also called housing ratio) measures your housing payment (principal, interest, taxes, insurance) relative to gross monthly income. Lenders typically want this below 28%, ensuring housing doesn't consume your entire budget.
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Most lenders want the front-end ratio below 28% (meaning housing costs don't exceed 28% of income). This ensures borrowers have sufficient income to cover their mortgage after accounting for other debt. A lower ratio improves loan approval chances.
Pro Tip
Keep your housing payment below 28% of income for optimal financial health and better loan approval chances.
Example
A borrower earning $6,000 monthly with a $1,500 PITI payment has a 25% front-end ratio ($1,500 ÷ $6,000), which is acceptable.