Lenders prefer a front-end ratio of no more than 28% for most loans and 31% or less for Federal Housing Administration (FHA) loans and a back-end ratio of no more than 43%. 3 Higher ratios indicate an increased risk of default.
Generally, lenders like to see a back-end ratio that does not exceed 36%. However, some lenders make exceptions for ratios of up to 50% for borrowers with good credit. Some lenders consider only this ratio when approving mortgages, while others use it in conjunction with the front-end ratio.