![]() ![]() A ratio higher than 28% can be accepted by a lender if the loan-to-value ratio (LTV) is low and/or the borrower demonstrates an excellent credit history. The threshold for the housing expense ratio set by lenders for mortgage loan approvals is typically equal to 28%. How to Interpret the Housing Expense Ratio? Importantly, the housing expense ratio can be calculated using both monthly and annual payments. The sum is then divided by the borrower’s pretax income to arrive at the housing expense ratio. To calculate the housing expense ratio, lenders sum up all the housing expense obligations of a borrower, such as operating expenses like future mortgage principal and interest expenses, monthly utilities, property insurance, and property taxes, etc. How to Calculate the Housing Expense Ratio? ![]() The total housing expense is a key component in calculating a borrower’s housing expense ratio. In fact, housing expenses embrace a large range of costs and are required to be submitted in the debt application process by lenders. Total housing expense is an expense that comprises a homeowner’s monthly mortgage expense (principal and interest), operating expenses, such as property taxes and insurance, utility bills, and property management fees, etc. To calculate the housing expense ratio, simply take the sum of all property expenses and divide it by a pretax income.The total house expense consists of all possible expenses associated with servicing a house (utilities, property taxes, and insurance, etc).Housing expense ratio is a ratio that compares housing expenses to earnings before tax (EBT) or pretax income. ![]()
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