What is the maximum permissible DTI ratio for qualified mortgages?

The maximum permissible debt-to-income (DTI) ratio for qualified mortgages is set at 43%. This standard stems from regulations established by the Consumer Financial Protection Bureau (CFPB), which aims to ensure that borrowers are able to repay their loans without taking on excessive financial risk. The DTI ratio is a crucial measurement used by lenders to assess borrower risk; it assesses the proportion of a borrower's gross monthly income that goes toward paying monthly debts.

By capping the DTI ratio at 43%, regulators seek to strike a balance between allowing access to credit for borrowers and protecting them from overextending financially. Borrowers with a DTI above this threshold may struggle to manage their debts, thus increasing the chances of default. Hence, while certain exceptions and compensating factors may allow for higher ratios in specific circumstances, the standard for qualified mortgages remains firmly at 43%.