How strict are lenders on 28/36 rule?

[jonben123]

Curious on past experiences with mortgage lenders and how strict they are with staying within the 28/36 rule.

[ShanetheMortgageMan]

I assume you are referring to housing ratio & total debt to income ratio?  

USDA normally caps out at 29%/41%, but with 680+ credit scores I've seen approvals up to 33% housing and 45% total.

FHA will go up to 46.99%/56.99%.

VA technically has no limit, just whatever automated underwriting approves as long as the residual income requirement is met.

Fannie Mae/Freddie Mac will go up to a 50% total debt ratio (no limit on housing ratio).

There are lenders who have overlays on the above debt to income ratios (the biggest one I see is usually limiting the VA debt ratio to no more than 60%), but for USDA, FHA & Fannie/Freddie you'll find that 9 out of 10 lenders go by the above limits.

[jonben123]

Yes, I was referring to the house/debt ratio.

Thank you very much for all of the useful information. I am rather unfamiliar with the USDA acronym. Is that somehow related to a conventional loan or something different?

[ShanetheMortgageMan]

USDA is a mortgage program for homes located in rural areas, for borrower's whose household income falls within eligibility limits.  It's 100% financing at interest rates similar to FHA.  

https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp is the website that has links to the eligible areas and income limits (and also an income eligibility link if you feel confident enough to input correct info).

[jonben123]

That makes sense.

Do these guidelines apply to conventional loans as well, as far as percentages that are typically approved?

[ShanetheMortgageMan]

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@jonben123 wrote:
Do these guidelines apply to conventional loans as well, as far as percentages that are typically approved?

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Fannie Mae/Freddie Mac = the most popular type of conventional financing.

There are other conventional mortgage programs too (that the vast majority of mortgage seekers wouldn't be interested in), which have debt ratio limits anywhere from 43-55%.  These would be jumbo loan programs, non-QM (formerly known as sub-prime) loan programs, and the like.