FRONT END RATIO

A ratio among several used by lenders to determine an applicant’s financial ability to pay back a loan. Contrast to the back end ratio as only applied-for loan installments are considered. The lower the ratio value, the higher ability to pay the installments. Known also as front ratio. Formula: (applied-for loan installment added to the monthly portion of estimated property taxes added to the monthly portion of estimated property insurance premium divided by the applicant’s gross monthly income). Also see back end ratio.

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