Finance
In Tennessee, a 'qualifying ratio' for FHA loans typically limits the front-end ratio to:
A28%
B31%✓ Correct
C36%
D43%
Explanation
FHA loans typically use a 31% front-end (housing expense) ratio guideline, though exceptions are possible with compensating factors. The back-end ratio limit is typically 43%.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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.
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