Real Estate Glossary

What is Housing Expense Ratio?

The housing expense ratio is a financial metric that compares the borrower's housing expenses, including mortgage payments, property taxes, and insurance, to their gross income. It is typically expressed as a percentage and is used by lenders to evaluate a borrower's ability to afford a mortgage. The housing expense ratio is usually determined by dividing the borrower's total housing expenses by their gross income, and lenders often set limits on how high this ratio can be for loan approval. This ratio is used to evaluate whether the borrower can afford the home, and whether the lender should give out the loan.