A Conventional loan is when applying for a conventional mortgage, lenders use debt-to-income (DTI) ratio guidelines to help determine how much you can afford to borrow. The standard guideline is known as 28/36.
- The 28% refers to your front-end ratio, which includes only your monthly housing expenses—things like your mortgage payment, property taxes, homeowners insurance, and HOA fees. Ideally, this amount should not exceed 28% of your gross monthly income (income before taxes and deductions).
- The 36% refers to your back-end ratio, which includes all of your monthly debt obligations. This means your total housing expenses plus minimum payments on credit cards, car loans, student loans, personal loans, and any other required payments such as alimony or child support. Combined, these debts should not exceed 36% of your gross monthly income.
- Effective January 1, 2025, the conventional conforming standard loan limits are:
- One-Family: $806,500
- Two-Family: $1,032,650
- Three-Family: $1,248,150
- Four-Family: $1,551,250
How Much Deposit Will I Need?
While some conventional Community Lending programs allow for a down payment as low as 3%, most standard conventional loans for single-family primary residences typically require the borrower to contribute at least 5% of the purchase price as a down payment.
In addition, if the down payment is less than 20%, the borrower is generally required to pay for private mortgage insurance (PMI) to protect the lender against default.
It’s important to know that these DTI limits are guidelines, not hard rules. In some cases, if you have strong compensating factors—like a high credit score, large savings, or a bigger down payment—lenders may approve your loan even if your DTI is slightly higher!
No matter your financial situation Miami Mortgages will get to work and find you a solution that works for you!
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