Front End Ratio Payment

The front-end ratio payment is how much of your gross (pretax) monthly income can go towards the mortgage payment. Lenders generally use 28% for mortgages with less than a 20% down payment. If you have good credit and a downpayment of 20% or more they will sometimes use 30% - 35%. For purposes of this calculation we have used 28% for a 10% down payment and 30% for a 20% down payment.

Back End Ratio Payment

The total debt-to-income, or back-end, ratio, shows how much of your gross income goes toward all of your debt obligations, including mortgage, car loans, child support and alimony, credit card bills, student loans and condominium fees. Lenders generally use 36%. For purposes of this calculation we use 36% for both a 10% down payment and a 20% down payment.

Selected Payment

Lenders use the lesser of the front end and back end ratios to determine your total monthly mortgage payment.

Taxes and Insurance

Annual property tax and insurance are used to determine your total monthly mortgage payment. The tax and insurance annual payments are proportioned over 12 months and subtracted along with mortgage insurance to determine your principal and interest payment.

Mortgage Insurance

Mortgage insurance is a policy that insures the lender against loss should the homeowner default on a mortgage. Normally, if you have a down payment of 20% or greater you do not have to pay mortgage insurance. For the purposes of this calculation we calculate estimated mortgage insurance for a down payment of 10% and use $0 for a down payment of 20%.

Principal & Interest Payment

The principal and interest payment is used to calculate your maximum loan amount. Monthly taxes, property insurance and mortgage insurance are subtracted from the lesser of the front end or back end payments to determine your principal and interest payment.

Down Payment

Down payment is the amount of cash you put towards the purchase of the house. We have calculated the maximum mortgage you can afford using down payments of 10% and 20%.

Loan Amount

The loan amount is the maximum amount of money you can borrow based on your income and debt expense.

Total Home Price

The home price is the total of your down payment and loan amount. This money would go towards the purchase of a home along with any additional closing costs.