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Jim has an annual income of $300,000. Jim is looking to buy a house with monthly...

Jim has an annual income of $300,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner’s insurance of $70. Jim has $178 in monthly student loan payments. Apple bank has a maximum front end DTI limit of 28% and a maximum back end DTI limit of 36%. Given both limits, what is the most they will allow Jim to spend on a monthly mortgage payment?

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Answer #1

Given,

Annual income= $300,000. Therefore, monthly income= 300000/12= $25,000

Monthly property tax and insurance= 140 + 70= $210

(A ): Monthly mortgage payment as per front end ratio of 28%= 25000*28%-210= 7000-210= $6,790

Monthly student loan payment= $178

Total amount that qualifies for back end ratio= 210+178= $388

(B ): Monthly mortgage payment as per back end ratio of 36%= 25000*36%-388= $8,612

Maximum allowed to spend on mortgage payments= Minimum of A and B= $6,790

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