Finance
A Washington borrower has $50,000 in student loan debt, a $400/month car payment, and earns $7,500/month gross income. The proposed mortgage PITI is $2,200/month. What is the back-end DTI ratio?
A29.3%
B43.7%✓ Correct
C37.0%
D52.4%
Explanation
Monthly student loan payment must be included (assume $500/month minimum). Total monthly debts = $2,200 + $400 + $500 = $3,100.
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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.
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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