Finance
The debt-to-income (DTI) ratio for a conventional mortgage typically should not exceed:
A28%
B36%
C43%✓ Correct
D50%
Explanation
For conventional mortgages, lenders typically want total DTI (including housing and all monthly debt payments) to not exceed 43% of gross monthly income. Some loan programs allow up to 50% DTI 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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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