Housing Expense Ratio

Housing Expense Ratio

The ratio of housing expense to borrower income.

This ratio is one factor used in qualifying borrowers. See Qualification/Meeting Income Requirements.

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As a general target, lenders like to see your housing expense ratio come in at no higher than 28 percent of gross monthly income, though there is flexibility to go higher if other elements of your application are viewed as strong.
In May, according to mortgage software and research firm Ellie Mae LLC, the average borrower who obtained home purchase money through investors Freddie Mac and Fannie Mae had a housing expense ratio of 22 percent.
Generally, more flexibility is appropriate for the monthly housing expense ratio than for the monthly debt payment ratio.
In Hyung's case, the lender could use the rent verification as justification for the higher ratio and include an explanation that the borrower's proven ability to pay rent equal to 32 percent of income supports the 32 percent housing expense ratio.

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