Finance
An Idaho borrower has a gross monthly income of $5,500. Using a 28% front-end ratio, what is the maximum monthly housing payment they would qualify for?
A$1,100
B$1,320
C$1,540✓ Correct
D$1,650
Explanation
Maximum housing payment = $5,500 x 28% = $1,540. This represents the front-end debt-to-income ratio limit for the monthly housing expense including principal, interest, taxes, and insurance (PITI).
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Math Concepts
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