Front-End Ratio
Real estateGlossary term
Definition
The percentage of gross monthly income that goes toward housing costs (mortgage, insurance, taxes). Lenders typically prefer this ratio to be below 28%.
Related terms
- Debt-to-Income RatioA financial metric that compares your total monthly debt payments to your gross monthly income, expressed as a percentage. Lenders use this ratio to assess your ability to take on additional debt, and most mortgage lenders prefer a ratio below 43%. A lower debt-to-income ratio indicates you have a healthy balance between debt and income.
- MortgageA loan used to purchase real estate where the property serves as collateral. The borrower makes regular payments over a set term (typically 15-30 years) until the loan is paid off.
- BudgetA financial plan that outlines expected income and expenses over a specific period. Creating and following a budget is essential for managing money and achieving financial goals.
Get advice that uses your real numbers
Warren reads your accounts and explains what terms like this mean for your plan. Free to start, no credit card required.