What is the maximum recommended housing expense ratio?

The maximum recommended housing expense ratio is a guideline that helps lenders and borrowers assess how much of a person's income should be allocated to housing expenses, which typically include mortgage payments, property taxes, insurance, and possibly homeowners association fees. A housing expense ratio of 28% is widely recognized as a standard benchmark in the industry. This means that ideally, no more than 28% of a borrower’s gross monthly income should go towards housing expenses. Staying within this ratio is seen as a way to ensure borrowers do not overextend themselves financially, helping them maintain a healthy budget and avoid potential financial distress.

Allocating more than 28% of one's income to housing may increase the risk of financial strain, as it leaves less room for other living expenses and savings. By adhering to this ratio, borrowers can make informed decisions about their housing options and lender requirements, ultimately promoting more sustainable homeownership practices.