A lender uses a 28% front-end qualifying ratio. If a borrower's gross monthly income is $6,000, what is the maximum allowable monthly housing expense?
Correct Answer
B) $1,680
The front-end (housing) ratio limits the borrower's monthly housing expense to a percentage of gross monthly income. $6,000 × 0.28 = $1,680. This is the maximum monthly housing payment (principal, interest, taxes, and insurance) the lender will allow.
Why This Is the Correct Answer
Why the Other Options Are Wrong
Deep Analysis of This Real Estate Math Question
Background Knowledge for Real Estate Math
Real World Application in Real Estate Math
Common Mistakes to Avoid on Real Estate Math Questions
Related Topics & Key Terms
Related Topics:
Key Terms:
More Real Estate Math Questions
$285,000 sale, 6%:
A triangular lot has a base of 200 feet and a height of 150 feet. What is the area of the lot?
Gross income $60,000, expenses $22,000. NOI:
Annual property taxes are $2,400, paid in arrears. Closing is August 1 (using a 360-day year, 30-day months). The closing day belongs to the buyer. How much does the seller owe the buyer at closing?
A property generates a net operating income (NOI) of $40,000 per year. Using a capitalization rate of 8%, what is the estimated value of the property?
- → An income-producing property generates a net operating income (NOI) of $35,000 annually. Using a capitalization rate of 7%, what is the estimated value of the property?
- → A seller closes on a property for $500,000. The commission is 6%, other seller closing costs are $4,500, and the existing mortgage payoff is $150,000. What are the seller's net proceeds before any tax effects?
- → A seller wants to net $250,000 after paying a 6% commission and has no other closing costs to consider. What sale price is needed?
- → A property sells for $220,000 and generates monthly rent of $1,600. What is the Gross Rent Multiplier (GRM)?
- → 175 ft × 200 ft lot:
- → A single-family residential property in Mississippi has a market value of $190,000. The local mill rate is 20 mills. Using Mississippi's residential assessment ratio of 10%, what is the annual property tax?
- → Annual property taxes are $4,800. Using a 360-day year (30 days per month), closing occurs on September 1 and the closing day belongs to the buyer. How much does the seller owe the buyer as a tax proration credit?
- → $310,000 sale, 3%/2.5%. Selling agent 70/30:
- → A buyer purchases a home for $258,000 with a 20% down payment. What is the amount of the mortgage loan?
- → A property has a net operating income of $42,000 and a capitalization rate of 7%. What is the estimated value of the property?
People Also Study
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Valuation and Market Analysis
10% of exam
Previous Question
A lender uses a 28% front-end qualifying ratio. If a borrower's gross monthly income is $4,800, what is the maximum allowable monthly housing payment?
Next Question
A lender uses a 28% front-end qualifying ratio. If a borrower's gross monthly income is $5,200, what is the maximum allowable monthly housing payment?