Definition
Front-end ratio (housing ratio)
The front-end ratio, also called the housing ratio, is the full monthly housing payment divided by gross monthly income. It counts principal, interest, property tax, homeowners insurance, mortgage insurance and HOA dues, but no other debts. It shows how much of a borrower's income the home alone would consume.
The front-end ratio isolates housing. Add up the proposed monthly principal and interest, one-twelfth of annual property tax and homeowners insurance, any mortgage insurance and any HOA dues, then divide by gross monthly income.
Worked example. A household earns $90,000 a year, or $7,500 a month. The target home carries $1,600 in principal and interest, $350 in taxes, $120 in insurance and $30 in HOA dues, for a $2,100 housing payment. The front-end ratio is $2,100 / $7,500 = 28%.
Twenty-eight percent is a traditional rule of thumb, not a universal rule. Some programs publish their own housing-ratio guidance, while many conventional files are driven mostly by the back-end ratio and the automated underwriting finding. The front-end ratio tends to be the binding limit for borrowers who carry little other debt; once car or student loan payments are large, the back-end ratio usually caps the price first.
Two mistakes distort it. One is leaving taxes and insurance out, which can understate the ratio by several points in high-tax areas. The other is using take-home pay instead of gross income. The affordability calculator applies both the housing and total limits and reports which one sets the price.
Calculators that use this term
FAQ · 2 questions
Questions about Front-end ratio (housing ratio)
What is the 28% rule in mortgages?
It is a long-standing guideline that the full housing payment should not exceed about 28% of gross monthly income. Lenders treat it as a reference point, not a hard limit, and many programs focus more on total debt.
Does the front-end ratio include HOA fees?
Yes. HOA or condo dues are part of the housing payment, along with principal, interest, taxes, insurance and any mortgage insurance.
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