Finance
What does 'DTI' stand for in mortgage lending, and what does it measure?
ADown payment to income; measures how much a buyer has saved
BDebt-to-income ratio; measures total monthly debt payments as a percentage of gross monthly income✓ Correct
CDeed to interest; measures the equity in a property
DDeposit to interest; measures the escrow account balance
Explanation
DTI (debt-to-income ratio) compares a borrower's total monthly debt obligations (housing + other debt) to their gross monthly income. Lenders use DTI to evaluate a borrower's ability to repay the mortgage.
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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.
DeedA written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Math Concepts
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