If a debt has no payment associated with it, what percentage is allocated as a qualifying payment by the underwriter?

If a debt has no payment associated with it, what percentage is allocated as a qualifying payment by the underwriter?

• A. 3%
• B. 5%
• C. 7%
• D. 10%

Answer: (B)

For a debt that has no payment associated with it, underwriters typically allocate a qualifying payment of 5% of the total debt balance. This guideline is established to account for potential obligations that could impact a borrower's ability to repay a new loan. By setting a standard percentage, lenders ensure that they are considering potential repayments for debts that, while currently not requiring payments, could still influence the overall financial health and debt-to-income ratio of the borrower. This approach helps to create a conservative estimate of the borrower's financial situation, minimizing the risk of default. By using this percentage, underwriters can better assess the borrower's qualifications based on their total debt obligations, ensuring responsible lending practices.

For a debt that has no payment associated with it, underwriters typically allocate a qualifying payment of 5% of the total debt balance. This guideline is established to account for potential obligations that could impact a borrower's ability to repay a new loan. By setting a standard percentage, lenders ensure that they are considering potential repayments for debts that, while currently not requiring payments, could still influence the overall financial health and debt-to-income ratio of the borrower.

This approach helps to create a conservative estimate of the borrower's financial situation, minimizing the risk of default. By using this percentage, underwriters can better assess the borrower's qualifications based on their total debt obligations, ensuring responsible lending practices.