A lender uses a 28% front-end qualifying ratio. If a borrower earns $6,000 per month in gross income, what is the maximum allowable monthly housing expense?
Correct Answer
B) $1,680
The front-end qualifying ratio limits the borrower's monthly housing expense to 28% of gross monthly income. $6,000 × 0.28 = $1,680. This is the maximum allowable monthly housing expense (PITI) the lender will approve.
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Related Topics & Key Terms
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Transfer tax is a tax imposed on the transfer of real property ownership, typically calculated based on the sale price and paid at closing. It is commonly expressed as a rate per $100, $500, or $1,000 of the sale price.
Annual interest is the total amount of interest charged on a loan or investment over a year.
Area calculation involves determining the square footage or acreage of a property using geometric formulas. Key conversions: 1 acre = 43,560 square feet, 1 mile = 5,280 feet, 1 section = 640 acres.
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