Total Housing Expense

DEFINITION of 'Total Housing Expense'

The sum of a homeowner's monthly mortgage principal and interest payments, hazard insurance premiums, property taxes and homeowner's association fees, plus monthly debt service. Monthly debt service consists of payments on credit cards, installment loans and other debts. A borrower's total housing expense is used in the calculation of a back-end ratio, which is used to qualify a borrower for a loan.

BREAKING DOWN 'Total Housing Expense'

A borrower's total housing expense as a percentage of his or her total gross monthly income (the back-end ratio) generally cannot exceed 56%; however, that limit can vary slightly based on the lender, loan program and market conditions. For a borrower whose back-end ratio exceeds the limit, compensating factors such as a good credit history, a low loan-to-value ratio, and substantial net worth might be considered by underwriters in granting approval for a mortgage.

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