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Formula
Add the monthly housing expenses you want to evaluate, then divide by gross monthly income.
Housing expense ratio = monthly housing expense ÷ gross monthly income × 100%
Worked example
A $2,250 monthly housing expense divided by $7,500 gross monthly income equals 30%.
Keep the numerator consistent
A mortgage payment alone gives a narrower ratio than a full housing cost that also includes taxes, insurance and association fees.
Common mistakes
- Mixing monthly expenses with annual income.
- Leaving out recurring housing costs unintentionally.
- Assuming the ratio alone determines affordability.
Frequently asked questions
What expenses can be included?
Principal and interest plus taxes, insurance and association dues are commonly considered in broader housing-cost estimates.
Why use gross income?
Many standard affordability ratios are defined using gross income.
Is 30% automatically affordable?
Not necessarily. Other debts and household expenses also matter.