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Learn how debt-to-income ratio affects mortgage approval, understand front-end vs back-end DTI, and discover the maximum mortgage you can afford for Conventional, FHA, USDA, and VA loans.
Read full articleMost lenders use the 28/36 rule: Your housing payment should not exceed 28% of your gross monthly income, and total debt payments should not exceed 36%.
The 28% front-end ratio means housing costs (PITI) should be under 28% of gross income. The 36% back-end ratio includes all debt payments.
Higher credit scores qualify for lower interest rates, which increases how much house you can afford. A 760+ score gets the best rates.
Private Mortgage Insurance is required when down payment is less than 20%. It typically costs 0.5-1% of the loan amount annually.
While 20% avoids PMI, many conventional loans accept as little as 3% down. FHA loans allow 3.5% down.
Closing costs are 2-5% of the home price and include appraisal, title insurance, origination fees, and prepaid taxes/insurance.
Lenders prefer DTI below 43%. A lower DTI means you can qualify for a larger loan and better rates.
Yes, these are part of PITI (Principal, Interest, Taxes, Insurance) and are often escrowed into your monthly payment.