Final answer:
The maximum Debt-to-Income ratio for USDA loans is typically 41%, but it can be higher for borrowers with a credit score over 680. This ratio is important as it ensures that borrowers aren't taking on too much debt relative to their income.
Step-by-step explanation:
The maximum Debt-to-Income (DTI) ratio for USDA loans is generally 41%. However, this can be higher if the borrower has a credit score over 680, which may provide some flexibility. USDA loans, administered by the United States Department of Agriculture, are designed to support rural development and provide a path to homeownership for low- to moderate-income households. They typically do this by offering more lenient eligibility requirements compared to conventional loans. The DTI ratio is a crucial factor considered by lenders, as it compares a borrower's total monthly debt to their gross monthly income, ensuring the borrower isn't taking on too much debt compared to their income. A higher DTI can signal a higher risk to lenders.