Which term describes the ratio of a borrower's housing expenses to their income?

Which term describes the ratio of a borrower's housing expenses to their income?

• A. Debt-to-Income Ratio
• B. Housing Expense Ratio
• C. Credit Utilization Ratio
• D. Expense-To-Income Ratio

Answer: (B)

The term that correctly describes the ratio of a borrower's housing expenses to their income is the Housing Expense Ratio. This ratio specifically focuses on the percentage of a borrower's gross monthly income that goes towards housing costs, including mortgage payments, property taxes, homeowners insurance, and possibly homeowners association (HOA) fees. Lenders often use this ratio to assess a borrower's ability to manage monthly housing payments in relation to their income, which is a crucial aspect of underwriting decisions. Understanding the Housing Expense Ratio is essential for mortgage loan officers, as it helps in determining whether a borrower is financially capable of taking on a new loan without overextending themselves.

The term that correctly describes the ratio of a borrower's housing expenses to their income is the Housing Expense Ratio. This ratio specifically focuses on the percentage of a borrower's gross monthly income that goes towards housing costs, including mortgage payments, property taxes, homeowners insurance, and possibly homeowners association (HOA) fees. Lenders often use this ratio to assess a borrower's ability to manage monthly housing payments in relation to their income, which is a crucial aspect of underwriting decisions.

Understanding the Housing Expense Ratio is essential for mortgage loan officers, as it helps in determining whether a borrower is financially capable of taking on a new loan without overextending themselves.