Finance
Washington borrowers applying for a conventional conforming loan must meet Fannie Mae/Freddie Mac guidelines regarding debt-to-income ratios. The typical maximum total (back-end) DTI for conforming loans is:
A28%
B36%
C45%✓ Correct
D55%
Explanation
While guidelines can vary with compensating factors and automated underwriting approval, Fannie Mae/Freddie Mac typically allow a maximum total DTI of up to 45% for manually underwritten loans, and sometimes up to 50% with strong compensating factors through automated underwriting.
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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.
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.
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.
Math Concepts
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