Finance
The debt-to-income (DTI) ratio most commonly used as a qualification benchmark for conventional loans is:
A28%/36%✓ Correct
B31%/43%
C43%/50%
D36%/50%
Explanation
The conventional guideline is 28% front-end DTI (housing expenses to gross income) and 36% back-end DTI (all debts to gross income), though many lenders allow higher ratios with compensating factors.
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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.
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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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