Your front-end ratio, also called the housing ratio, measures how much of your gross monthly income (pay before taxes) the new house payment will take. Car loans, cards and other debts stay out of this one and show up in the back-end ratio instead.
What goes into the housing payment
Lenders build the payment from these pieces, often shortened to PITI plus mortgage insurance:
- Principal and interest on the loan
- Property taxes, which run roughly 0.74% to 0.95% of the price a year in QualRate's Florida defaults
- Homeowners insurance, including wind coverage
- Mortgage insurance, meaning FHA's annual MIP or Conventional PMI
- HOA dues, when the home has them
- Flood insurance, when the home sits in a flood zone that requires it
How high each program lets it go
On $4,800 a month of gross income, here's the largest house payment each program's housing limit allows:
| Program | Housing limit | Highest house payment on $4,800 |
|---|---|---|
| FHA, automated approval | 46.9% | $2,251.20 |
| FHA, manual, two compensating factors | 40% | $1,920.00 |
| FHA, manual, no compensating factors | 31% | $1,488.00 |
| USDA | 29% | $1,392.00 |
| Conventional and VA | No separate limit | Set by the total ratio |
Conventional loans approved through Fannie Mae's Desktop Underwriter look at total debt only, with a 50% ceiling. VA leans on the total ratio and residual income. On both programs the front-end number still appears on the approval, but it has no cap of its own.
A $285,000 home on $4,800 a month
A buyer earning $4,800 a month gross wants a $285,000 single-family home with FHA's 3.5% down. The base loan is $275,025, and the 1.75% upfront MIP ($4,812.94) is added on top.
- Principal and interest at a 5.75% rate: $1,633.06
- Annual MIP at 0.55%: $126.05
- Property taxes at 0.95% a year: $225.63
- Homeowners insurance: $240.00
- House payment: $2,224.74
$2,224.74 divided by $4,800 is 46.35%, just under FHA's 46.9%. Now suppose the insurance quote on that house comes back at $340 a month instead of $240. The payment becomes $2,324.74, the ratio climbs to 48.43%, and a $100 insurance difference has pushed the buyer over the line.
When the housing ratio is the limit
In Florida, insurance is often the piece that moves this ratio most. A wind mitigation inspection that documents roof straps, impact windows or a newer roof can earn premium credits, and on an older home a clean four-point inspection helps the buyer get coverage at a normal price. A co-signer's income raises the bottom of the fraction. A seller credit can pay discount points that lower the rate, and a slightly lower price trims principal, interest, taxes and MIP all at once.
The DTI calculator shows your front-end and back-end ratios side by side for FHA, Conventional, VA and USDA. When an insurance quote or tax bill pushes the housing ratio over, call AAA Capital Funding at 888-601-8344 and we'll rework the payment with you.