Using the term "three C's" in mortgage underwriting, the housing expense ratio is primarily concerned with which element?

In mortgage underwriting, the "three C's" refer to Collateral, Capacity, and Creditworthiness, which are essential factors in assessing a borrower's ability to repay a loan. The housing expense ratio, often expressed as a percentage, measures the portion of a borrower's income that goes toward housing expenses, including mortgage payments, property taxes, and insurance.

The element that the housing expense ratio is primarily concerned with is Capacity. This refers to the borrower's ability to make the mortgage payments based on their income and existing financial obligations. By analyzing this ratio, underwriters can determine whether a borrower has sufficient income to afford the requested mortgage, ensuring they have the capacity to manage not just the loan payment, but also other related expenses.

The other elements—Collateral, which focuses on the property being financed, and Creditworthiness, which assesses the borrower’s credit history—are also important in the underwriting process but are not the primary concern of the housing expense ratio. Instead, the ratio specifically highlights the borrower's income and their capacity to handle housing costs, making it a critical metric in the underwriting evaluation.