👉 Lender math is the process used by lenders to determine whether a borrower can repay a loan and at what interest rate. It involves calculating the borrower's ability to service the debt based on their income, expenses, and other financial factors. The primary metrics include the borrower's debt-to-income ratio (DTI), which compares monthly debt payments to gross income, and the loan-to-value ratio (LTV) for mortgages, which assesses the loan amount relative to the property's value. Lenders also consider credit scores and financial history to gauge risk. Using these calculations, lenders set interest rates and loan terms that balance the risk of lending against the borrower's potential repayment capacity, ensuring both the lender's safety and the borrower's affordability.
