Housing Ratio

[ithaca]

I understand that lenders typically used this ratio this qualify a loan. How is the ratio computed and what is the purpose of it.

[omara]

This is the ratio of your housing payment (principal, interest, taxes and insurance) to your monthly gross income.

[shibuya]

Also known as the front end ratio, the common figure is about 28%. In other words, less than 30% of your income should be used to service your monthly housing payment.
Anything more would be stretching it.

[spacy]

If your housing expense ratio is high, you are considered "house poor" - simply put, much of your income is taken up by your house payment.