Question

When qualifying a borrower, an installment debt down not need to be included in the debt ratio on conventional loans when the balance of the term of repayment is less than how many months?

Answer 1

For conventional loans, an installment debt with less than 10 months left in payments does not need to be included in debt-to-income ratios during borrower qualification.

Step-by-step explanation:

When qualifying a borrower for a conventional loan, an installment debt does not need to be included in the debt-to-income ratio if the remaining balance of the term of repayment is less than 10 months. Lenders consider debts with fewer than 10 months of payments left as less impactful on the borrower's financial situation.

This is because the debt will soon be paid off, reducing the borrower's monthly financial obligations, and thereby making it more likely they can handle new credit.