Real Estate Math
A Delaware buyer's gross monthly income is $7,500. Using a 43% back-end (total debt) ratio, what is the maximum total monthly debt (including housing)?
A$2,625
B$3,225✓ Correct
C$3,525
D$2,100
Explanation
Maximum total monthly debt = Gross Monthly Income × Back-End Ratio = $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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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