What is the housing expense ratio (HER) primarily used to assess?

The housing expense ratio (HER) is primarily used to assess monthly housing expenses as a percentage of income. This ratio helps lenders determine a borrower's ability to manage housing payments in relation to their income, which typically includes costs such as mortgage payments, property taxes, homeowners insurance, and homeowners association fees.

By evaluating this ratio, lenders can gauge whether a potential borrower can afford to take on additional debt without exceeding a manageable threshold of their income dedicated to housing costs. A healthy HER indicates that a borrower is likely to handle their financial obligations effectively, enhancing the likelihood of loan approval.

Other options like assessing the borrower's credit score, total annual income, or the property's value focus on different aspects of the lending process and do not directly relate to the specific calculation and purpose of the housing expense ratio.