Finance
A Connecticut borrower's gross monthly income is $7,500. A conventional lender requires the total DTI to be 43% or less. What is the maximum total monthly debt including the mortgage?
A$2,100
B$2,625
C$3,000
D$3,225✓ Correct
Explanation
Maximum total monthly debt = $7,500 × 0.43 = $3,225.
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Key Terms to Know
Debt-to-Income Ratio (DTI)
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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