Finance
A Michigan borrower's 'front-end' DTI ratio of 28% means:
A28% of their assets are liquid
BTheir proposed PITI payment equals 28% of their gross monthly income✓ Correct
CThey owe 28% of their gross income to creditors
DTheir down payment is 28% of the purchase price
Explanation
The front-end DTI (housing ratio) is the proposed monthly housing expense (PITI) divided by the borrower's gross monthly income. A 28% front-end ratio means PITI = 28% of gross monthly income, within conventional lending guidelines.
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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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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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