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.
Expressed as a percent of your monthly income, this is called your housing expense ratio. Over time, in addition to any possible increases in your interest rate and how fast you must repay principal, your insurance premiums and property taxes will tend to increase.
Your fully-indexed housing expense ratio is a key measure of whether you can afford this loan.
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.