Housing Expense Ratio Definition
Housing Expense Ratio is the percentage of before-tax income that goes toward a monthly house payment. Lenders use this measure to qualify borrowers for a mortgage. House payment includes principal, interest, real estate taxes, hazard insurance, mortgage insurance and association fees. The rule of thumb is that it should not exceed 28 of the gross income, but a higher ratio may be acceptable if the loan-to-value ratio is low or the borrower has an excellent credit history.