Real Estate Math
A buyer's gross income is $6,800/month. Using a 36% back-end ratio, what is the maximum total monthly debt allowed?
A$1,904
B$2,040
C$2,448✓ Correct
D$2,720
Explanation
Maximum total monthly debt: $6,800 × 0.36 = $2,448.
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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.
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.
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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