Real Estate Math
A borrower's gross monthly income is $7,500. Using a 28% front-end ratio, what is the maximum monthly PITI payment the lender would approve?
A$1,750
B$2,100✓ Correct
C$2,625
D$3,000
Explanation
Maximum PITI = $7,500 × 28% = $2,100. To solve this, multiply the relevant values: $7,500 at 28%..
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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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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