A borrower earns $6,500 monthly and has the following debts: proposed PITI $1,800, car payment $450, credit card minimum $200, student loan $300. What is their back-end DTI ratio?
Correct Answer
B) 42.3%
Back-end DTI includes all monthly debt payments. Total debt = $1,800 + $450 + $200 + $300 = $2,750. Back-end DTI = $2,750 ÷ $6,500 = 42.3%. This ratio includes housing payment plus all other recurring monthly debt obligations.
Why This Is the Correct Answer
Back-end DTI includes all monthly debt payments. Total debt = $1,800 + $450 + $200 + $300 = $2,750. Back-end DTI = $2,750 ÷ $6,500 = 42.3%. This ratio includes housing payment plus all other recurring monthly debt obligations.
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A lender originates a $400,000 conventional loan that meets all GSE guidelines except it has a 45% debt-to-income ratio when the maximum allowed is 43%. This loan would be classified as:
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A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?