Housing Ratio
The percentage of your gross monthly income consumed by total housing costs (PITI).
Where DTI captures all debt, the housing ratio (also called the front-end ratio) zeroes in on housing-only costs: principal, interest, property taxes, homeowner's insurance, and any HOA dues. Mortgage insurance premiums are also included when applicable.
Most conventional programs prefer housing ratios under 28%, though guideline files routinely close higher when other strengths offset. Government loan programs generally accept higher front-end ratios because their insurance or guarantee de-risks the file for the lender.
Housing ratio matters because it's a leading indicator of payment stress. A borrower at 35% housing ratio can technically afford the loan on paper but has very little cushion for tax reassessments, insurance hikes, or HOA special assessments.
Related terms
Other terms you'll see alongside Housing Ratio
The percentage of your gross monthly income that goes toward debt payments, including the proposed new mortgage.
The four components that make up a typical fully-escrowed monthly mortgage payment.
The lender's formal review of a loan application to confirm it meets program guidelines and is acceptable to fund.
An annual tax levied by local governments on real estate, based on the property's assessed value.
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