In mortgage lending, what term is used for the borrower's ability to repay the loan?

The term that specifically refers to the borrower's ability to repay the loan is the Debt-to-Income Ratio. This ratio is a critical metric used by lenders to assess a borrower's financial health and capacity to manage monthly payments. It compares the borrower’s total monthly debt payments to their gross monthly income. By evaluating this ratio, lenders can determine whether the borrower can afford the mortgage payments alongside other obligations.

A high debt-to-income ratio may indicate that a borrower is financially stretched, making it a vital component in underwriting decisions. Therefore, a lower ratio is generally more favorable, as it suggests that a borrower has a more manageable level of debt relative to their income, enhancing their likelihood of successfully repaying the loan. This ratio plays a crucial role in securing approvals for mortgages as it provides insight into the borrower's financial stability and responsibility.