Which two ratios are commonly used for loan qualifying?

The 28/36 ratios are commonly used in loan qualifying because they provide a standard framework that lenders utilize to assess a borrower's ability to manage housing costs and overall debt obligations.

Specifically, the first number, 28, indicates that no more than 28% of the borrower's gross monthly income should be allocated to housing expenses, which typically include mortgage payments, property taxes, homeowner's insurance, and any applicable homeowner's association fees. This percentage ensures that borrowers do not stretch their financial resources too thin with their housing expenditures.

The second number, 36, signifies that the total debt payments, including housing expenses and all other debts such as car loans, credit card payments, and personal loans, should not exceed 36% of the borrower's gross monthly income. This ratio helps lenders evaluate the overall financial health of the borrower, ensuring that they have enough income left over for other living expenses after meeting their debt obligations.

Together, these ratios help provide a balanced approach to qualifying for a mortgage, reducing the risk of default and ensuring borrowers can maintain their financial stability.