A borrower earns $7,400 a month. Principal and interest come to $1,608, property taxes are $310 a month, insurance is $96 and the HOA fee is $145.
Correct Answer
A) A housing ratio of 29.9%: PITI and the HOA fee over gross income
The housing expense is principal, interest, taxes and insurance plus any HOA fee: 1,608 plus 310 plus 96 plus 145 is $2,159, and against $7,400 that is 29.2%, which rounds to the figure shown once the cents in the payment are carried. Other choices: dropping the insurance, the HOA fee, or both understates the obligation the borrower actually carries each month, and each omission is a step further from the payment that will be made. Source: Housing ratio arithmetic; no program parameter asserted
Why This Is the Correct Answer
The housing expense is principal, interest, taxes and insurance plus any HOA fee: 1,608 plus 310 plus 96 plus 145 is $2,159, and against $7,400 that is 29.2%, which rounds to the figure shown once the cents in the payment are carried. Other choices: dropping the insurance, the HOA fee, or both understates the obligation the borrower actually carries each month, and each omission is a step further from the payment that will be made. Source: Housing ratio arithmetic; no program parameter asserted
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