What is the maximum housing expense ratio recommended for borrowers?

The maximum housing expense ratio recommended for borrowers is typically around 28%. This ratio is used to evaluate an individual's ability to manage monthly housing expenses, which include mortgage payments, property taxes, homeowners insurance, and any applicable homeowners association fees.

A 28% housing expense ratio allows borrowers to allocate a significant portion of their income toward housing costs while maintaining sufficient funds for other living expenses. Lenders often utilize this ratio to assess the risk of lending to potential homeowners, as it reflects a manageable level of debt in relation to income.

In many lending guidelines, exceeding this ratio can signal financial strain, as borrowers might struggle to cover additional expenses or save for emergencies. Therefore, keeping housing expenses within this 28% guideline helps ensure borrowers can meet their overall financial obligations without undue hardship.