Housing Expense Ratio
A ratio comparing housing expenses to before-tax income that is used by lenders to qualify borrowers for a mortgage. The housing expense measure includes mortgage principal, interest payments, property taxes, hazard insurance, mortgage insurance and association fees. The limit is generally 28%.
It is sometimes referred to as the "front ratio". Investopedia Says:
A housing expense ratio higher than the standard 28% may be acceptable to lenders based on compensating factors such as a low loan-to-value ratio and/or an excellent credit history. In addition, applying jointly with a co-borrower can lower a housing expense ratio, as can choosing certain mortgage products with initial low payments. However, some of these perks can add up to big debt later, so buyers should be wary. Related Terms:
Back-End Ratio
Debt-To-Income Ratio - DTI
Front-End Ratio
Household Income |