What are the conventional loan qualifying ratios for a home payment to gross income and total debt to income?

The correct answer reflects the standard qualifying ratios used in the mortgage lending process for conventional loans. Specifically, these ratios are designed to evaluate a borrower's ability to manage their debt in relation to their income.

For a conventional loan, the general guidelines suggest that a borrower should ideally spend no more than 28% of their gross monthly income on housing expenses (which include the mortgage payment, property taxes, homeowners insurance, and any fees associated with the property). Additionally, the total debt-to-income (DTI) ratio should not exceed 36%. This total DTI calculation takes into account all monthly debt obligations, including housing payments, car loans, credit card debt, and other liabilities in relation to the borrower's gross monthly income.

These ratios help lenders assess the risk associated with lending money. By adhering to these guidelines, financial institutions can better ensure that borrowers are not overextended, thus reducing the likelihood of default. Hence, the selected qualifying ratios of 28% for housing expenses and 36% for total debt serve as benchmarks to maintain a sound lending environment.