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LendingRisk.com Mortage Industry Dictionary

Terminology, definitions, terms, explanations, and documents for business professionals in the mortgage lending and mortgage risk management industries.

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Housing Ratio

Lenders use a Housing Ratio as an indication of the borrower's ability to repay a mortgage loan. The Housing Ratio is the borrower's monthly housing expenses (to include taxes, insurance, etc.) divided by the borrower's monthly income.

For a conforming loan, lenders typically want the borrower to have a Housing Ratio of 28% or less. The housing expenses included in the expense portion of the Housing Ratio equation are the house payment (principal & interest), taxes (state and local real estate taxes), insurance (home and/or private mortgage insurance) and homeowner's association fees. The combination of principal, interest, taxes and insurance is commonly referred to by the acronym of PITI in the mortgage industry. The Housing Ratio does NOT include estimated monthly utilities - e.g. water and electricity expenses.

Lenders review the Housing Ratio and the Total Ratio to determine how much they will lend a borrower.

See Borrower Debt to Income (DTI) Overview
See Debt To Income (DTI) Ratio
See PITI
See Total Ratio
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Terminology, definitions, terms, explanations, and documents for business professionals in the mortgage lending and mortgage risk management industries.