The Lengths to Which Mortgage Lenders Will Go

Written by nickel - 6 Comments

I learned something interesting today… If your credit is good enough, some mortgage lenders will approve mortgages that bring you up to a 50% back-end ratio. In case you’re wondering what that means, your front-end ratio is your total monthly mortgage payment vs. you gross monthly income, whereas your back-end ratio is your total monthly debt obligations vs. gross monthly income. Is it just me, or is that an insane amount of debt to be carrying? Crazy stuff.

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Published on April 4th, 2006 - 6 Comments
Filed under: Mortgages
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Comments (scroll down to add your own):

Yeah, that is an insane amount of debt.
Comment by Blaine Moore — Apr 4th 2006 @ 8:06 am
Or just very little income. LOL.
Comment by MoneyDummy — Apr 4th 2006 @ 8:30 am
But what if your mortgage is your only debt so that your front-end ratio is very close to your back-end ratio? In that case, is it acceptable to have a 50% ratio if all 50% is so-called “good debt” (vs. bad debt like credit cards, car loans, etc.)?

I wouldn’t mind finding a lender who would give me a 50% back-end ratio. Then I might actually be able to afford a house around here!
Comment by Nick — Apr 4th 2006 @ 8:59 am
Nick, you’re right. 50% front-end ratio would make you house poor. That would be just as bad as a 50% back-end ratio. Ours is nowhere near those..
Comment by Emma — Apr 4th 2006 @ 11:13 am
I can think of one possible legitimate reason for doing that. If the income that you can document to the bank’s satisfaction, such as a salary, is the basis for the 50% back-end ratio, but it is not your entire income, it might make sense. If you have substantial income from investments, but it is not reliable enough to satisfy the lender, your actual bank-end ratio may be well below 50%. That is the only reason I would even consider taking on a mortgage like that.
Comment by Anonymous — Apr 4th 2006 @ 1:55 pm
So many people think that just because you they get approved for something (mortgage, car, etc) they must be able to afford it.
Comment by Stephen Snyder — Apr 10th 2007 @ 2:10 pm