Utilizing the following information, calculate the housing expense ratio. Monthly Principal and interest on mortgage loan: $635; Monthly Tax and insurance payments into escrow: $125; Gross monthly income: $2,500

A. 25.4%

B. 30.4%

C. 44.4%

D. 53.2%

B) 30.4%

Explanation:

The housing expense ratio is calculated by dividing total monthly expenses by gross monthly income. Total monthly expenses include monthly payments on loans, property taxes, insurance premiums and other related fees.

housing expense ratio = (loan payment + insurance costs) / gross monthly income = ($635 + $125) / $2,500 = $760 / $2,500 = 30.4%