How is the debt-to-income (DTI) ratio calculated?
Correct Answer
A) Total monthly debt payments divided by gross monthly income
The debt-to-income (DTI) ratio is calculated by dividing a borrower's total monthly debt payments by their gross monthly income. Lenders use DTI to assess a borrower's ability to manage monthly payments and repay the loan.
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Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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