Broad Housing Ratio (HR2)

While the housing ratio focuses specifically on housing expenses, there’s a broader perspective often referred to as the broad housing ratio or HR2. This expanded metric takes into account not just direct housing costs but also additional expenses indirectly related to your living situation:

Direct housing expenses

encompass the same elements as the standard housing ratio, including mortgage payments, property taxes, homeowners insurance, and PMI.

Indirect housing expenses

represent additional costs associated with your living situation, such as:

Utilities

Electricity, water, gas, and trash removal.

Home maintenance and repairs

Costs associated with upkeep and potential repairs.

Homeowners Association (HOA) fees

Applicable for properties with association memberships.

Commuting costs

Expenses related to transportation to and from work or essential locations.

Other debt payments

This includes any outstanding debts, such as student loans, car loans, and revolving credit card debt.

Note that this numerator is deliberately broader than the back end of the classic 28/36 lending rule, which counts only PITI and debt payments. Holding the broad measure to the same 0.36 line is therefore a stricter test than the one your lender applies — which is the point: the lender is underwriting its recovery, you are underwriting your budget.

HR2 $\le 0.36$

is considered healthy. This indicates that your overall housing-related expenses remain within a manageable range, allowing sufficient room for other essential needs and financial goals.

$0.36<$ HR2 $\le 0.42$

might be acceptable for some individuals depending on their circumstances, but exceeding this range can raise concerns about potential financial strain.

HR2 $>0.42$

is generally considered unsustainable and could lead to financial difficulties, especially if unexpected expenses arise.