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.

RELATED TERMS
  1. Term Payment Plan

    An option for receiving reverse mortgage proceeds that gives ...
  2. Reverse Mortgage Financial Assessment

    A review of the borrower’s credit history, employment history, ...
  3. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
  4. Front-End Ratio

    A ratio that indicates what portion of an individual's income ...
  5. 100% Mortgage

    A mortgage loan in which the borrower receives a loan amount ...
  6. Modified Tenure Payment Plan

    A way to receive reverse mortgage proceeds that gives the borrower ...
Related Articles
  1. Personal Finance

    How to Use a Mortgage Calculator to Save Time and Money

    Calculate your monthly mortgage payment using the Investopedia's free calculator.
  2. Personal Finance

    How Regulations Protect Reverse Mortgage Borrowers

    They're complex animals, which is why there are government guidelines in place to protect borrowers.
  3. Investing

    Explaining Debt Service

    Debt service is a measure of a person or entity’s use of cash to pay interest and principal on debt obligations.
  4. Investing

    Explaining Debt

    Debt is any amount a borrower owes a lender.
  5. Personal Finance

    Reduce Interest With An All-In-One Mortgage

    "Offset" mortgages combine a checking account, home-equity loan and mortgage into one account.
  6. Investing

    Debt Ratio

    The debt ratio divides a company’s total debt by its total assets to tell us how highly leveraged a company is—in other words, how much of its assets are financed by debt. The debt component ...
  7. Personal Finance

    Interest-Only Mortgages: Home Free Or Homeless?

    These loans can be beneficial, but for many borrowers, they present a financial trap.
  8. Personal Finance

    How Much Mortgage Can You Afford?

    Here's how to determine what you should be borrowing to finance your home.
  9. Investing

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
RELATED FAQS
  1. What is the debt ratio for an FHA loan?

    Borrowing through the Federal Housing Administration requires individuals to provide proof of income as well as information ... Read Answer >>
  2. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  3. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
Trading Center