What is the debt-to-income ratio for Freddie Mac?
When the Borrower's monthly debt payment to income ratio exceeds 45%, the loan is ineligible for sale to Freddie Mac. As a guideline, the monthly debt payment-to-income ratio should not be greater than 33% to 36% of the Borrower's stable monthly income.
Debt-to-income ratio (DTI): Freddie Mac doesn't provide a maximum DTI requirement, though borrowers should aim for a DTI equal to or less than 50%. This is a general DTI guideline when qualifying for a mortgage.
Read our editorial guidelines here . Your debt-to-income (DTI) ratio is how much money you earn versus what you spend. It's calculated by dividing your monthly debts by your gross monthly income. Generally, it's a good idea to keep your DTI ratio below 43%, though 35% or less is considered “good.”
This summer Fannie Mae and Freddie Mac, on marching orders from their regulator Federal Housing Finance Agency, are going to charge certain borrowers a 0.375% fee on their loan amount if their total house payment and other debts exceed 40% of their monthly gross income.
Maximum DTI Ratios
The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix. For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%. See B3-1-01, Comprehensive Risk Assessment for information about the DTI.
There are many factors that impact whether or not you can get a mortgage, and your DTI is just one of them. Some lenders may be willing to offer you a mortgage with a DTI over 50%. However, you are more likely to be approved for a loan if your DTI is below 43%, and many lenders will prefer than your DTI be under 36%.
The DTI ratio for conventional loans may be up to 50%; however, most lenders prefer a DTI ratio of no more than 43%. FHA loan. An FHA loan is a type of government-insured mortgage loan that has more relaxed qualifying requirements than conventional mortgage loans provided by private lenders.
35% or less: Looking Good - Relative to your income, your debt is at a manageable level. You most likely have money left over for saving or spending after you've paid your bills. Lenders generally view a lower DTI as favorable.
Meanwhile, any ratio above 43% is considered too high. The biggest piece of your DTI ratio pie is bound to be your monthly mortgage payment. The National Foundation for Credit Counseling recommends that the debt-to-income ratio of your mortgage payment be no more than 28%.
A good DTI ratio to get approved for a mortgage is under 36%, but it's possible to qualify with a higher ratio.
What is Freddie Mac interest rate today?
| Change | ||
|---|---|---|
| Average Rates | Current | 1 week |
| 30 Yr. Fixed | 6.88% | +0.06% |
| 15 Yr. Fixed | 6.16% | +0.10% |
| Number of Units | Maximum baseline conforming loan limit values for properties NOT in Alaska, Hawaii, Guam and U.S. Virgin Islands | |
|---|---|---|
| 2024 | 2023 | |
| 1 | $766,550 | $726,200 |
| 2 | $981,500 | $929,850 |
| 3 | $1,186,350 | $1,123,900 |
Complete signed federal individual and S corporation (Form 1120S) income tax returns, including the Schedule K-1(s), Form 1125-E and W-2(s) if applicable, for the most recent two years. The Borrower must be self-employed (i.e., have an ownership interest of 25% or more) in the same business for at least five years.
However, some may consider a higher DTI of up to 50% on a case-by-case basis. For FHA and VA loans, the DTI ratio limits are generally higher than those for conventional mortgages. For example, lenders may allow a DTI ratio of up to 55% for an FHA and VA mortgage.
What payments should not be included in debt-to-income ratio? Expand. The following payments should not be included: Monthly utilities, like water, garbage, electricity or gas bills.
Government-backed loan options, such as FHA, USDA and VA loans, are typically the easiest type of mortgage to get because they may have lower down payment and credit score requirements compared to conventional mortgage loans.
How to calculate your debt-to-income ratio. Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. Specifically, it's the percentage of your gross monthly income (before taxes) that goes towards payments for rent, mortgage, credit cards, or other debt.
Conventional loans: Typically require a DTI ratio of 43% to 45%. Lenders might allow higher ratios, up to 50% for applicants with good credit history or substantial cash reserves. FHA loans: Offer more flexibility with DTI ratios, allowing up to 50%.
Character, capital, capacity, and collateral – purpose isn't tied entirely to any one of the four Cs of credit worthiness. If your business is lacking in one of the Cs, it doesn't mean it has a weak purpose, and vice versa.
- Increase the amount you pay monthly toward your debts. ...
- Ask creditors to reduce your interest rate, which would lead to savings that you could use to pay down debt.
- Avoid taking on more debt.
- Look for ways to increase your income.
Is 38% DTI too high?
Generally, an acceptable DTI ratio should sit at or below 36%. Some lenders, like mortgage lenders, generally require a debt ratio of 36% or less. In the example above, the debt ratio of 38% is a bit too high. However, some loans allow for higher DTIs, please see below.
Ideally, financial experts like to see a DTI of no more than 15 to 20 percent of your net income. For example, a family with a $250 car payment and $100 of monthly credit card payments, and $2,500 net income per month would have a DTI of 14 percent ($350/$2,500 = 0.14 or 14%).
Empower borrowers to make informed decisions for responsible homeownership by eliminating a common barrier with a down payment as low as 3%. The Freddie Mac Home Possible® mortgage offers more options and credit flexibilities than ever before to help very low- to-low-income borrowers attain the dream of owning a home.
Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.
What to expect from mortgage rates in 2024. Mortgage forecasters base their projections on different data, but most housing market experts predict rates will move toward 6% by the end of 2024.
