Finance
What is the debt-to-income (DTI) ratio and why is it important for Nevada mortgage applicants?
AThe ratio of property debt to property value
BThe ratio of monthly debt payments to gross monthly income; lenders use it to assess a borrower's ability to repay✓ Correct
CThe ratio of down payment to total purchase price
DThe ratio of property taxes to mortgage payment
Explanation
DTI = Total Monthly Debt Payments / Gross Monthly Income. Lenders use DTI to evaluate a borrower's ability to manage monthly payments.
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Key Terms to Know
Debt-to-Income Ratio (DTI)
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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