Include Household Expenses to Better Assess Borrower’s Ability to Pay

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Photo by Jay Coble

This article was originally posted on on April 2, 2013

Since the 1930s, when the Federal Housing Administration published its earliest underwriting manuals, mortgage lenders have used a loan applicant's debt-to-income ratio to measure his or her ability to pay a mortgage loan. But lenders today typically count only a limited basket of loan applicant expenses toward DTI: the new mortgage payment, taxes and insurance and other loan payments.

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