Question

The lender requires a borrower's total debt payment ratio to be 36% or less, and the mortgage debt service ratio to be no more than 28% of gross income. If the Gonzales have PITI payments of $2575 per month and $600 of additional debt, how much gross income do they need to qualify for the mortgage? $11339 $9196 $8819 $7153

Answer 1

As per 28/36 rule, an individual can spend a maximum of 28% of his gross income on his housing debt including housing expenses(like PITI). And a maximum of 36% of his gross income on total debt which includes housing, car and other debt services.

Since, Gonzales have PITI payments of $2575 per month and $600 of additional debt which makes him come under 36% or less rule .

Total Mortgage Debt = $2575 + $600 = $3175

Annual Gross Income Needed to qualify = Total Mortgage Debt/36%

Annual Gross Income Needed to qualify = $3175/36%

Annual Gross Income Needed to qualify = $8819

Option C

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