Qualifying ratios for loans

Question 1

What is the maximum Housing expense ratio (HER) 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

What is the maximum Total obligations ratio (TOR) for a conventional loan?

Answer 3

36%

TOR is used to assess overall debt load.

Question 4

How do you calculate the Total obligations ratio (TOR)?

Answer 4

monthly total obligations % monthly gross income = TOR

Total obligations include all monthly debt payments.

Question 5

What does ‘total obligations’ refer to?

Answer 5

all the recurring debt payments that an individual is responsible for on a monthly basis

Examples include house payment, card payment, credit card payment (monthly minimum payment), student loan, alimony, etc.