What is a standard debt-to-income ratio?
A debt-to-income ratio of 28/36 is usually accepted by traditional lenders. The 28/36 ratio can go up to a maximum permissible limit of 37/40. There are a couple of lenders who agree to give you a loan even at higher debt-to-income ratio. However, it becomes risky and you may land up in serious trouble if you are not able to make payments for the loans you avail. In case of FHA loans, the permissible debt-to-income ratio is 31/43. Subprime borrowers can have a back ratio of 55. It is better not to avail loans if you have a high debt-to-income ratio. Why is debt-to-income ratio so important? Debt-to-income ratio is vital due to the following reasons. Credibility Creditors approve of your loan application by seeing your repayment capacity or your credibility. If the lender finds that by giving you loan, he may not get back the loan amount, he stays away from the deal or settles for a loan amount that has a very high rate of interest. A higher debt-to-income ratio is a disqualifying facto
