Dictionary of Real Estate Terms: front-end ratio
front-end ratio
the monthly payment for a loandivided by the loan applicant's qualifying monthly income. Used in the mortgage underwriting process as one measure of the risk that the applicant will default on the loan. Contrast with back-end ratio.
Example: The Jameses applied for a mortgage to buy a new home. The loan required a $500 monthly payment (including escrow payments). Mr. James earns $3,000 per month, and Mrs. James does not have an income. The lender calculated a front-end ratio of 16.7%, which is well within the maximum for this type of loan.
