A borrower has a credit card with a $10,000 balance and $200 minimum monthly payment. They plan to pay off $8,000 of the balance before closing, leaving a $2,000 balance with a $40 minimum payment. How should this be calculated for DTI purposes?
Correct Answer
B) Use $40 monthly payment
When a borrower will pay down debt before closing and can document this with a payoff letter or similar evidence, the DTI calculation should use the new, lower monthly payment that will exist after the paydown. This tests understanding of how debt paydowns affect DTI calculations when properly documented.
Why This Is the Correct Answer
When a borrower will pay down debt before closing and can document this with a payoff letter or similar evidence, the DTI calculation should use the new, lower monthly payment that will exist after the paydown. This tests understanding of how debt paydowns affect DTI calculations when properly documented.
More Mortgage Knowledge Questions
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