What does TOR stand for in mortgage terminology?

What does TOR stand for in mortgage terminology?

• A. Total Obligations Ratio
• B. Total Outstanding Ratio
• C. Total Original Ratio
• D. Time Of Repayment ratio

Answer: (A)

In mortgage lending, a key measure of a borrower’s ability to repay is how much of their income is tied up in debt. TOR, or Total Obligations Ratio, captures this by looking at all recurring monthly debt payments relative to gross monthly income. You add up every debt payment a borrower has—credit cards, student loans, car loans, alimony or child support, and the housing payment—and divide that total by the borrower’s gross monthly income. For example, if someone earns $6,000 a month and pays $2,400 in debt obligations each month, their TOR would be 40%. This ratio is basically the back-end debt-to-income measure, showing the overall debt burden as a share of income. The other terms listed aren’t standard mortgage terminology, which is why the correct option is Total Obligations Ratio.

In mortgage lending, a key measure of a borrower’s ability to repay is how much of their income is tied up in debt. TOR, or Total Obligations Ratio, captures this by looking at all recurring monthly debt payments relative to gross monthly income. You add up every debt payment a borrower has—credit cards, student loans, car loans, alimony or child support, and the housing payment—and divide that total by the borrower’s gross monthly income. For example, if someone earns $6,000 a month and pays $2,400 in debt obligations each month, their TOR would be 40%. This ratio is basically the back-end debt-to-income measure, showing the overall debt burden as a share of income. The other terms listed aren’t standard mortgage terminology, which is why the correct option is Total Obligations Ratio.