What is the housing expense ratio also known as?

The housing expense ratio is commonly referred to as the front-end ratio. This term specifically describes the portion of a borrower’s monthly income that goes toward housing costs, such as mortgage payments, property taxes, and insurance. Lenders often use the front-end ratio to assess the risk associated with a borrower’s ability to manage their housing expenses relative to their income.

This ratio is significant because it helps lenders determine whether a borrower can reasonably afford the monthly payments on a home loan without straining their budget. Generally, a lower front-end ratio is favorable as it indicates a better financial balance.

The other terms provided describe different aspects of debt management. The debt-to-income ratio takes into account all of a borrower's monthly debt payments, not just housing expenses. The back-end ratio includes housing expenses in addition to other debts, making it a broader measure. The loan affordability index pertains to the overall ability to afford a loan based on various financial factors, rather than focusing solely on housing expenses. Thus, the specific and precise definition of the front-end ratio aligns perfectly with the housing expense ratio.