Real Estate Math
A Minnesota buyer's net income is $7,500/month and gross income is $9,200/month. The lender uses the gross income for qualification. Using a 28% front-end ratio, what is the maximum monthly PITI payment?
A$2,100
B$2,576✓ Correct
C$2,240
D$1,960
Explanation
Maximum PITI = Gross monthly income x Front-end ratio = $9,200 x 28% = $2,576. Mortgage lenders use gross (pre-tax) income for qualification purposes, not net take-home pay. The 28% front-end ratio limits the housing expense to a manageable percentage of gross income. Minnesota borrowers should use gross income when calculating their qualifying payment.
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