What does the abbreviation HER stand for in mortgage lending?

The abbreviation HER in mortgage lending stands for Housing Expense Ratio. This term refers to the percentage of a borrower's gross income that goes toward housing-related expenses, which typically include principal and interest payments, property taxes, homeowners insurance, and, if applicable, mortgage insurance.

The Housing Expense Ratio is significant because it helps lenders assess an applicant’s ability to manage monthly housing costs in relation to their income, aiding in the decision of whether to approve a mortgage application. This ratio is often a critical component of a lender's overall underwriting process, alongside other considerations such as credit scores and debt-to-income ratios.

Understanding this concept is vital for both mortgage professionals and consumers, as it plays a key role in evaluating affordability and financial stability within the home-buying process.