The 40% rule states that a borrower's total monthly debt payments, including their mortgage payment, should not exceed 40% of their gross monthly income.
This rule is used by lenders to assess the borrower's ability to handle their debt and make timely payments.
If the borrower's debt-to-income ratio exceeds 40%, they may be considered a higher risk to lenders and have difficulty qualifying for a mortgage.
It is important to note that the 40% rule is not a hard and fast rule and may vary from lender to lender.
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Posted on : 25 Jan 2023 11:23 AM