Humber/Ontario Real Estate Course 4 Exam Practice

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Prepare for the Humber/Ontario Real Estate Course 4 Exam with our comprehensive practice tests. Study with flashcards and multiple-choice questions, complete with hints and detailed explanations. Achieve success on your real estate licensing journey!

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What term is used for a lender's ratio of allowable payments and debt to an applicant’s monthly income?

Blended debt service ratio.
Gross debt service ratio.
Total principal debt ratio.
Total debt service ratio.
Net income ratio.
Serviceable debt ratio.

The correct answer is: Total debt service ratio.

The term that corresponds to a lender's ratio of allowable payments and debt to an applicant's monthly income is known as the Total Debt Service Ratio. This ratio assesses a borrower’s ability to manage monthly payments on debts, including mortgages, which helps lenders determine how much a borrower can afford to repay without overextending their finances. Calculating the total debt service ratio involves dividing the total of all monthly debt payments by the applicant's gross monthly income. This ratio is an essential metric for lenders, as it provides insight into whether a borrower can handle additional debt responsibilities while managing their living expenses. A common benchmark for the total debt service ratio is that it should not exceed a certain percentage of the borrower’s income, a standard that helps in ensuring borrower’s financial stability. The other options refer to different financial concepts that either measure specific subsets of debt or income or are not standard terminology used by lenders in the same context.