http://www.fhaloanpros.com/2007/10/mortgage-lending-do-all-borrowers-cheat/ The Unofficial Guide to FHA Loans & Mortgages Thu, 21 Aug 2008 22:48:43 +0000 http://wordpress.org/?v=2.0.5 http://www.fhaloanpros.com/2007/10/mortgage-lending-do-all-borrowers-cheat/#comment-656 Wed, 31 Oct 2007 13:08:57 +0000 http://www.fhaloanpros.com/2007/10/mortgage-lending-do-all-borrowers-cheat/#comment-656 Another point that should be addressed in this legislation is the mention of one of the guages which determines the borrower's qualification for the mortgage. Everyone considers that the 50%(or 45%) Debt/Income ratio is a qualifier for the mortgage. In my opinion, there is another ratio that bears greater importance if we want to determine whether the borrower will be able to repay the mortgage. The Housing Expense Ratio is Housing Expense/ Income. There is a recognized range that relates to the expenditure of housing expenses..such as mortgage payment, interest, R/E taxes, insurance, repairs, etc. This ratio is a better determinant of the ability to repay. I would conjecture that a borrower may have a lower than 45-50% Debt/Income ratio but if the Housing Expense Ratio is above the recognized range, which research has proven to apply, it is possible that the borrower may have selected a mortgage that he/she will not be able to handle...even though the Debt/Income ratio is within the range of the FSC legislation. Another point that should be addressed in this legislation is the mention of one of the guages which determines the borrower’s qualification for the mortgage. Everyone considers that the 50%(or 45%) Debt/Income ratio is a qualifier for the mortgage. In my opinion, there is another ratio that bears greater importance if we want to determine whether the borrower will be able to repay the mortgage. The Housing Expense Ratio is Housing Expense/ Income. There is a recognized range that relates to the expenditure of housing expenses..such as mortgage payment, interest, R/E taxes, insurance, repairs, etc. This ratio is a better determinant of the ability to repay. I would conjecture that a borrower may have a lower than 45-50% Debt/Income ratio but if the Housing Expense Ratio is above the recognized range, which research has proven to apply, it is possible that the borrower may have selected a mortgage that he/she will not be able to handle…even though the Debt/Income ratio is within the range of the FSC legislation.

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