In: Finance
Suppose an individual has $62,500 in annual income and considering a home that they intend to finance with a $175,000 mortgage at 5% APR 30-year fixed rate loan, the real estate taxes and insurance are $2,500 per year, auto payments are $300/month, and student loans payments are $350/month.
What is the front-end ratio?
Calculating Monthly Payment,
Using TVM Calculation,
PMT = [PV = 175,000, FV = 0, N = 360, I = 0.05/12]
PMT = $939.44
PITI = 939.44 + 300 + 350 + 2,500/12
PITI = $1,797.77
Front end ratio = 1,797.77/(62,500/12)
Front end ratio = 0.316