Finance
A Washington borrower's debt-to-income ratio (DTI) is calculated by dividing:
AAnnual income by total debt
BTotal monthly debt payments (including PITI) by gross monthly income✓ Correct
CNet monthly income by total debt
DMonthly housing payment by net monthly income
Explanation
DTI = Total monthly debt payments (including proposed housing PITI — principal, interest, taxes, insurance) ÷ Gross monthly income. Lenders use DTI to assess a borrower's ability to repay.
People Also Study
Related Washington Questions
- A Washington borrower's monthly principal and interest payment is $2,100. The lender requires the housing expense ratio not to exceed 28%. What minimum monthly gross income is required?Finance
- A Washington buyer qualifies for a maximum monthly payment (PITI) of $3,200. Annual taxes are $4,800 and annual insurance is $1,200. What is the maximum monthly P&I payment?Real Estate Math
- A Washington buyer's monthly gross income is $9,500 and they have a car payment of $450/month. The lender applies a 43% DTI limit. What is the maximum allowable monthly housing payment (PITI)?Real Estate Math
- A Washington buyer qualifies for a maximum monthly mortgage payment of $2,600 PITI. Taxes = $350/month, Insurance = $120/month. What maximum loan amount might the buyer qualify for if the P&I factor is $6.65 per $1,000 at 7%?Real Estate Math
- A Washington buyer has a gross monthly income of $11,000. Maximum allowed housing ratio is 28% and total DTI is 43%. They have $800/month in other debt. What is the maximum PITI?Real Estate Math
- 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?Finance
- A Washington borrower has an existing mortgage with a low interest rate and wants to sell their home to a buyer who would like to take over the payments. The buyer's ability to do this depends on whether the existing mortgage is:Finance
- A Washington borrower's gross monthly income is $9,200. Their monthly debts include car payment ($450), student loan ($300), and proposed mortgage PITI ($2,400). What is the back-end DTI ratio?Finance
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
Study This Topic
Practice More Washington Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Washington Quiz →