The core economic principle states that a sustainable mortgage must remain within the income capacity of the household responsible for paying it. It distinguishes real affordability from mere approval limits.
Approval defines what a lender is willing to risk, often based on collateral value and theoretical capacity. Affordability, however, must be grounded in actual, verifiable income to prevent long-term default risk and household stress.
Misalignment between true income and the mortgage structure creates instability, not just for the homeowner, but for the entire housing ecosystem. This systemic risk is what the 60/40 method directly mitigates.