Housing Expense Ratio
The housing expense ratio is the percentage of your gross monthly income devoted to housing expenses. Your lender uses a top ratio and a bottom ratio in deciding what you can afford in housing expenses. The top ratio is calculated by dividing your new monthly mortgage payment by your monthly gross income. Typically, this ratio should not exceed 28%. The bottom ratio is equal to your new monthly mortgage payment plus your monthly debt divided by your gross income per month. Typically, this ratio should not exceed 36%.