The Balancing Act of Qualifying for a Mortgage in Colorado
Gross monthly income and recurring debts, together with your proposed house payment are evaluated with your debt-to-income ratio.
The first evaluation considers your total house payment (Principal & Interest, Taxes, Insurance, and Mortgage insurance and Homeowner's association fees (if applicable) - PITIMH) and divides this number by your gross monthly income. This is called your "front-end ratio."
The second evaluation considers your total house payment together with your minimum monthly payments on your debts - and divides that total by your gross monthly income. This is called your "back-end ratio."
With few exceptions, every home loan program allows for a specific "front-end" and "back-end" ratio.
Although your specific ratios will help your mortgage consultant determine how much house you can afford, it is critical that you evaluate how much your household budget can support and communicate this number to your mortgage consultant.
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