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What is another term for housing ratio?
I’m applying for a mortgage pre-approval. I know that a mortgage lender uses a housing ratio to help determine what I can afford. However, I can’t find any mention of it in my documents, so I’m wondering if they’re using a different term. What’s another term for housing ratio?
Emily Maracle · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Every lender is different, so it’s great you’re taking the time to learn more about the process. There are several terms for housing ratio that lenders may use. The most common are:
- Front-end ratio
- Front-end DTI ratio
- House-to-income ratio
- PITI ratio
While the names vary, they all measure the same thing. A housing ratio measures how much of your income is needed to pay your mortgage or home expenses.
Unlike regular debt-to-income ratios (DTI), housing ratios only look at your home expenses, meaning your mortgage payment and the principal, taxes, interest, and insurance it includes. Most lenders prefer you have less than a 28% housing ratio.
To calculate your housing ratio, you’ll need to divide your mortgage payment by your gross monthly income. If you haven’t seen an estimated mortgage payment yet, use an online calculator to get an estimate of what you may pay based on where you live and what home you may purchase.
While having a housing ratio of 28% or less is preferred, you may still be eligible for a mortgage if you have a high credit score and a low overall debt-to-income ratio.
If you want to save money on home, renters, or car insurance, the
Jerry
app is a good place to start. A licensed broker, Jerry does all the hard work of finding cheap quotes from the top name-brand insurance companies and buying new home or renters insurance. View full answer
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