HER, TOR (conventional, FHA, VA loan)

Question 1

The Housing expense ratio (HER) must not exceed what amount for a conventional loan?

Answer 1

28%

HER is a critical factor in determining loan eligibility.

Question 2

How do you calculate the Housing Expense Ratio (HER)?

Answer 2

monthly housing expense (PITI) % monthly gross income = HER

PITI stands for Principal, Interest, Taxes, and Insurance.

Question 3

Do you include the PMI (private mortgage insurance) in the HER calculation?

Answer 3

yes

Question 4

Do you include the PMI (private mortgage insurance) in the TOR calculation?

Answer 4

yes

Question 5

The Total Obligations Ratio (TOR) must not exceed what amount for a conventional loan?

Answer 5

36%

TOR includes all monthly debt obligations.

Question 6

How do you calculate the Total Obligations Ratio (TOR)?

Answer 6

monthly total obligations % monthly gross income = TOR

This ratio helps lenders assess overall debt levels.

Question 7

What is the minimum Housing Expense Ratio (HER) for an FHA loan?

Answer 7

31%

FHA loans are designed to assist borrowers with lower credit scores.

Question 8

What is the minimum Total Obligations Ratio (TOR) for an FHA loan?

Answer 8

43%

This ratio indicates a higher level of acceptable debt compared to conventional loans.

Question 9

What is the Total Obligations Ratio (TOR) for a VA loan?

Answer 9

41%

• VA loans offer favorable terms for eligible veterans.
• In between the conventional loan (hardest to get) and the FHA loan (easiest to get, all about affordability)

Question 10

Fill in the blank: Between the conventional loan and the FHA loan, the _______ is considered the hardest to get.

Answer 10

conventional loan

Conventional loans typically require higher credit scores and lower debt ratios.