A borrower's debt-to-income (DTI) ratio is calculated by dividing:
Why Monthly debt payments by gross monthly income Is Correct
Answer B: Monthly debt payments by gross monthly income
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
People Also Study
Related California Questions
- A borrower's monthly gross income is $8,500. The lender uses a 43% maximum DTI. The borrower has $850 in existing monthly debt payments. What is the maximum allowable monthly mortgage payment?Real Estate Math
- A borrower's gross monthly income is $8,500. The lender requires a housing expense ratio of no more than 28%. What is the maximum allowable monthly housing payment?Real Estate Math
- A buyer's monthly gross income is $6,000. Their monthly debts include a $400 car payment and a $100 student loan payment. The proposed PITI is $1,500. What is the buyer's total debt-to-income (back-end) ratio?Real Estate Math
- A borrower makes 360 monthly payments of $1,200. The original loan was $180,000. How much total interest was paid?Real Estate Math
- Under conventional lending standards, what is the maximum LTV ratio for a first mortgage on a single-family home that does NOT require private mortgage insurance (PMI)?Finance
- A gross lease for a commercial unit requires the tenant to pay $3,000 per month. The landlord pays all operating expenses, which total $900 per month. What is the landlord's effective net income from this lease per month?Property Management
- What is the debt-to-income (DTI) ratio, and why is it important to mortgage lenders?Finance
- The loan-to-value (LTV) ratio is calculated as:Finance
Key Terms to Know
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
Study This Topic
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →