Suppose you earn a gross income of $2,730 per month and apply for a mortgage with a monthly PITI of $510.51. You have other financial obligations totaling $431.34 per month. (Use the ratio guidelines from your text) What type of mortgage, if any, would you qualify for?

Question

Quizplus · Accepted Answer

Based on the ratio guidelines commonly used for mortgage qualification, which typically include a front-end ratio (mortgage payment to income) of 28-31% and a back-end ratio (total debt payments to income) of 36-43%, the applicant's financial situation fits within these parameters. The monthly mortgage payment of $510.51 is about 18.7% of the gross income ($2,730), well below the typical front-end ratio limit. Adding the other financial obligations ($431.34) to the mortgage payment for a total of $941.85 results in a back-end ratio of about 34.5%, also within acceptable limits. Therefore, the applicant could qualify for both FHA and conventional mortgages.

Suppose You Earn a Gross Income of $2,730 Per Month