What are the Qualifying Ratios for a conventional loan?

The qualifying ratios for a conventional loan refer to the percentage of a borrower's gross monthly income that can be allocated toward housing expenses and total monthly debts. These ratios serve as guidelines for lenders to assess the borrower's ability to manage monthly loan payments while maintaining a reasonable standard of living.

In conventional lending, the common guideline is that the borrower's housing expenses should not exceed 28% of their gross monthly income, while their total debt obligations (including housing expenses and all other debts) should not exceed 36%. This framework helps ensure that borrowers are not taking on more debt than they can afford.

This ratio is relevant for assessing housing affordability and ensuring that borrowers can comfortably meet their financial obligations without facing undue stress. Hence, the reason why this particular answer is correct lies in its adherence to standard conventional loan guidelines, reflecting a balance between income and debt that lenders typically look for.