source:
  type: regulation
  id: fhlmc-5401.1
  authority: Freddie Mac Single-Family Seller/Servicer Guide §5401.1 — Monthly housing expense-to-income ratio (05/06/26)
  description: "Freddie Mac Guide §5401.1 (Monthly housing expense-to-income ratio). Gap-fill (verbatim, ID-diff).\
    \ \n"
obligations:
- id: fhlmc-5401.1-0
  canonical_id: fhlmc-5401.1-0
  section: Freddie Mac Guide 5401.1
  description: '5401.1 Monthly housing expense-to-income ratio: (05/06/26) This section contains requirements related
    to: ■ Establishing the monthly housing expense for Mortgages secured by Primary Residences ■ Establishing the
    monthly housing expense for Mortgages secured by second homes and Investment Properties ■ Establishing the monthly
    h…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - fhlmc-guide
  - section-complete
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide §5401.1 — Monthly housing expense-to-income ratio
      (05/06/26)
    source_class: gse-guide
    source_url: https://guide.freddiemac.com/
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '(05/06/26) This section contains requirements related to: ■ Establishing the monthly housing
      expense for Mortgages secured by Primary Residences ■ Establishing the monthly housing expense for Mortgages
      secured by second homes and Investment Properties ■ Establishing the monthly housing expense for Mortgages
      with a non-occupying Borrower ■ Rental payment documentation requirements ■ Housing expense-to-income ratio
      requirements based on underwriting method ■ Other Guide provisions related to the monthly housing expense-to-income
      ratio The housing expense-to-income ratio is determined by dividing the Borrower’s monthly housing expense
      by the Borrower’s stable monthly income and/or qualifying asset amount as described in Section 5307.1(b).
      The monthly housing expense must be documented in the Mortgage file and established as described below. (a)
      Establishing the monthly housing expense for Mortgages secured by Primary Residences ■ For Mortgages secured
      by a Primary Residence, the following expenses must be included in the calculation of the monthly housing
      expense-to-income ratio: ❑ Principal and interest payments on the Mortgage ❑ Property hazard insurance premiums
      ❑ Real estate taxes ■ New construction: When the actual real estate tax amount is not yet available, the real
      estate tax amount included in the monthly housing expense must be based on the value of the improvements and
      the land ■ Transfer of ownership: If the Mortgaged Premises is in a jurisdiction where transfer of ownership
      causes or results in a recalculation of the amount of real'
    drafter_attestation: Verbatim from Freddie Guide §5401.1 body (max-gap occurrence), snapshot 5869ee9e606cd4ae;
      substring-verified.
  judgment: false
- id: fhlmc-5401.1-1
  canonical_id: fhlmc-5401.1-1
  section: Freddie Mac Guide 5401.1
  description: '5401.1 Monthly housing expense-to-income ratio: 401-2 estate tax, the monthly housing expense must
    include an estimate of the recalculated tax amount ■ Tax abatements: The real estate tax amount included in
    the monthly housing expense may be reduced or excluded when the Mortgage file contains all of the following:
    ❑ Evidence t…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - fhlmc-guide
  - section-complete
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide §5401.1 — Monthly housing expense-to-income ratio
      (05/06/26)
    source_class: gse-guide
    source_url: https://guide.freddiemac.com/
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '401-2 estate tax, the monthly housing expense must include an estimate of the recalculated
      tax amount ■ Tax abatements: The real estate tax amount included in the monthly housing expense may be reduced
      or excluded when the Mortgage file contains all of the following: ❑ Evidence to support the reduced real estate
      tax amount ❑ Evidence of continuance for at least five years after the Note Date ❑ If the Borrower is not
      currently receiving the tax abatement, evidence the Borrower and/or the property is eligible for the reduced
      real estate tax amount ■ Tax exemptions: The real estate tax amount may be excluded from the monthly housing
      expense when the Mortgage file contains all of the following: ❑ Evidence to support the reduced real estate
      tax amount ❑ Evidence of continuance for at least five years after the Note Date. However, if the tax exemption
      is due to the Borrower’s age or disability, documentation verifying five years’ continuance is not required,
      provided the exemption does not have a predetermined expiration date within five years of the Note Date. ❑
      If the Borrower is not currently receiving the tax exemption, evidence the Borrower and/or the property is
      eligible for the tax exemption ■ The following additional expenses must be included when applicable: ❑ Mortgage
      insurance premiums ❑ Flood insurance premiums only if coverage is required in accordance with Section 4703.3
      ❑ Leasehold payments ❑ Special assessments with more than 10 monthly payments remaining ❑ Homeowners association
      dues (excluding unit utility charges) ❑ Maintenance Fees (excluding unit utility charges) ❑ Payments on secondary
      financing, including a Home Equity Line of Credit (HELOC). HELOC payments must be included when there is an
      outstanding balance on the account. In the absence of a monthly payment on the credit report for the HELOC,'
    drafter_attestation: Verbatim from Freddie Guide §5401.1 body (max-gap occurrence), snapshot 5869ee9e606cd4ae;
      substring-verified.
  judgment: false
- id: fhlmc-5401.1-2
  canonical_id: fhlmc-5401.1-2
  section: Freddie Mac Guide 5401.1
  description: '5401.1 Monthly housing expense-to-income ratio: 401-3 and if there is no documentation in the Mortgage
    file indicating a monthly payment amount, 1.5% of the outstanding balance is considered the monthly payment
    amount. Refer to Section 4204.1 for when documentation of HELOC terms is required and to Section 5501.3 when
    HELOC pr…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - fhlmc-guide
  - section-complete
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide §5401.1 — Monthly housing expense-to-income ratio
      (05/06/26)
    source_class: gse-guide
    source_url: https://guide.freddiemac.com/
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '401-3 and if there is no documentation in the Mortgage file indicating a monthly payment amount,
      1.5% of the outstanding balance is considered the monthly payment amount. Refer to Section 4204.1 for when
      documentation of HELOC terms is required and to Section 5501.3 when HELOC proceeds are used for the transaction.
      ❑ For properties subject to resale restrictions, recurring monthly payments associated with the financial
      subsidy that was provided when the property was purchased by the Borrower. See Section 4406.3 for additional
      requirements related to such payments. (b) Establishing the monthly housing expense for Mortgages secured
      by second homes and Investment Properties For Mortgages secured by second homes and Investment Properties,
      the monthly housing expense is the sum of the monthly charges described above in Section 5401.1(a) for each
      Borrower’s Primary Residence. If the Borrower does not own but rents their principal domicile, the Borrower’s
      rental payment for that principal domicile must be included in the calculation of the monthly housing expense-to-income
      ratio. (c) Establishing the monthly housing expense for Mortgages with a non-occupying Borrower For Mortgages
      with a non-occupying Borrower, the monthly housing expense is the sum of the monthly charges described above
      in Section 5401.1(a) for each Borrower’s Primary Residence. If the Borrower does not own but rents their principal
      domicile, the Borrower’s rental payment for that principal domicile must be included in the calculation of
      the monthly housing expense-to-income ratio. (d) Rental payment documentation requirements When the Borrower
      rents their principal domicile, one of the following is required to verify the monthly rental payment amount:
      ■ Direct verification of rent from a management company ■ Direct verification of rent from an individual landlord
      supported by two months of canceled checks or other evidence of two months’ payments ■ A copy of the current,
      fully executed lease agreement supported by two months of canceled checks or other evidence of two months’
      payments ■ Six months of canceled checks or bank statements supporting consistent payments in the amount used
      in qualifying'
    drafter_attestation: Verbatim from Freddie Guide §5401.1 body (max-gap occurrence), snapshot 5869ee9e606cd4ae;
      substring-verified.
  judgment: false
- id: fhlmc-5401.1-3
  canonical_id: fhlmc-5401.1-3
  section: Freddie Mac Guide 5401.1
  description: '5401.1 Monthly housing expense-to-income ratio: 401-4 (e) Housing expense-to-income ratio requirements
    based on underwriting method (i) Mortgages underwritten with Loan Product Advisor® For Loan Product Advisor
    Mortgages, Loan Product Advisor calculates and assesses the Borrower’s qualifying ratios based on submitted
    data. For…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - fhlmc-guide
  - section-complete
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide §5401.1 — Monthly housing expense-to-income ratio
      (05/06/26)
    source_class: gse-guide
    source_url: https://guide.freddiemac.com/
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '401-4 (e) Housing expense-to-income ratio requirements based on underwriting method (i) Mortgages
      underwritten with Loan Product Advisor® For Loan Product Advisor Mortgages, Loan Product Advisor calculates
      and assesses the Borrower’s qualifying ratios based on submitted data. For Accept Mortgages, Loan Product
      Advisor has determined that the Borrower’s qualifying ratios are acceptable. (ii) Manually Underwritten Mortgages
      (A) For all Manually Underwritten Mortgages For Manually Underwritten Mortgages, the Seller must evaluate
      the Borrower’s ability to pay the monthly housing expense and other obligations. As a guideline, the monthly
      housing expense-to-income ratio should not be greater than 28%. An exception can be made only with an offset
      documented in the Mortgage file. Examples of offsets that might support the use of higher monthly payment
      ratios are found in Section 5401.2(d). Generally, more flexibility is appropriate for the monthly housing
      expense-to-income ratio than for the monthly debt payment-to-income ratio. Less flexibility is appropriate
      for situations involving additional layers of risk (i.e., ARMs, a marginal credit reputation, minimal reserves
      or maximum financing). For any Manually Underwritten Mortgage for which either of the ratio guidelines is
      exceeded, the Seller must prepare and retain in the Mortgage file a written explanation justifying its underwriting
      decision. (B) Additional requirements for GreenCHOICE Mortgages® that are Manually Underwritten Mortgages
      For GreenCHOICE Mortgages that are Manually Underwritten Mortgages, higher qualifying ratios may be appropriate,
      considering the impact energy efficiency has on the Borrower’s utility charges (i.e., an energy-efficient
      property results in lower utility charges, allowing the homeowner to apply more income to housing expense).
      If one or both of the higher qualifying ratios are used for a GreenCHOICE Mortgage, the Seller must provide
      one of the following to the appraiser, as well as maintain a copy in the Mortgage file, to evidence that the
      property has a level of energy efficiency greater than that of a “standard” (i.e., non-energy-efficient) property:'
    drafter_attestation: Verbatim from Freddie Guide §5401.1 body (max-gap occurrence), snapshot 5869ee9e606cd4ae;
      substring-verified.
  judgment: false
- id: fhlmc-5401.1-4
  canonical_id: fhlmc-5401.1-4
  section: Freddie Mac Guide 5401.1
  description: '5401.1 Monthly housing expense-to-income ratio: 401-5 ■ Home Energy Rating Systems (HERS) report
    completed by a certified Residential Energy Services Network (RESNET®) Home Energy Rater reflecting a HERS Index
    of 90 or below (http://www.resnet.us/directory/search) ■ Department of Energy (DOE) Home Energy Score Report
    completed…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - fhlmc-guide
  - section-complete
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide §5401.1 — Monthly housing expense-to-income ratio
      (05/06/26)
    source_class: gse-guide
    source_url: https://guide.freddiemac.com/
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '401-5 ■ Home Energy Rating Systems (HERS) report completed by a certified Residential Energy
      Services Network (RESNET®) Home Energy Rater reflecting a HERS Index of 90 or below (http://www.resnet.us/directory/search)
      ■ Department of Energy (DOE) Home Energy Score Report completed by an independent Home Energy Score Certified
      AssessorTM reflecting a DOE Home Energy Score of six or greater (https://betterbuildingssolutioncenter.energy.gov/home-energy-score/home-
      energy-score-map) See Section 5601.4 for detailed appraisal requirements for properties with energy- efficient
      improvements. (f) Other Guide provisions related to the monthly housing expense-to-income ratio Refer to the
      following Guide sections for details on: Topic Guide section ARM qualifying rates Section 4401.2 Temporary
      subsidy buydown plans Section 4204.3(a) Special underwriting requirements for second home Mortgages Section
      4201.12(b) Special underwriting requirements for Investment Property Mortgages Section 4201.13(b) Mortgages
      including a non-occupying Borrower Section 5103.1'
    drafter_attestation: Verbatim from Freddie Guide §5401.1 body (max-gap occurrence), snapshot 5869ee9e606cd4ae;
      substring-verified.
  judgment: false
