According to Fannie Mae and Freddie Mac standards, what percentage of a borrower's income can be applied toward housing expenses for a conventional loan?

The correct answer is based on the guidelines established by Fannie Mae and Freddie Mac, which serve as standards for conventional loans. For these loans, it is generally recommended that a borrower should ideally spend no more than 28% of their gross monthly income on housing expenses. This percentage includes costs such as the mortgage payment, property taxes, homeowner's insurance, and homeowners association fees if applicable.

The rationale behind this guideline is to ensure that borrowers maintain a healthy balance between their income and monthly housing costs, which contributes to their overall financial stability. By adhering to this percentage, lenders can reduce the risk of default, ensuring that borrowers are not overextended financially.

The other percentages listed, while they may reflect various industry standards or borrower scenarios, do not align with the specific guidelines provided by Fannie Mae and Freddie Mac for conventional loans regarding housing expense limits.