Definition: The Mortgage-to-Monthly-Income Ratio (MIRR) measures how much a borrower can afford to spend on a mortgage based on their monthly salary or net income. This ratio helps lenders assess the affordability of a mortgage by comparing the amount a borrower would be able to pay back in monthly payments, taking into account all fixed and variable-rate mortgages, including government-sponsored enterprises (GSEs). The MIRR is typically used for calculating loan-to-value ratios (LTV) in U.S. residential real estate lending. It takes into account the interest rate paid by the borrower on a mortgage and the total amount of principal and interest due over the life of the loan. The formula for determining the MIRR involves dividing the monthly payment by the net income of the borrower, taking into account both fixed-rate mortgages and variable-rate mortgages, including government-sponsored enterprises (GSEs). This calculation helps lenders understand how much a borrower can afford to pay back on a mortgage based on their monthly income, and it is used in determining loan-to-value ratios for real estate loans. The MIRR is considered an important tool in the housing market due to its ability to accurately reflect the affordability of borrowers, especially for first-time homebuyers, low-income households, and those with lower incomes. By comparing a borrower's monthly income to their monthly mortgage payment, lenders can better assess their risk and make informed decisions about lending. Overall, the MIRR is an essential tool in assessing the financial responsibility of prospective homeowners and investors in the housing market.

mortgage to monthly income ratio