What is the maximum monthly house payment a bank will approve based on a $90,000 income if the maximum debt-to-income ratio for housing debt is 28%?

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Study for the New Jersey Real Estate State Exam. Engage with flashcards and multiple choice questions, each equipped with hints and explanations. Prepare thoroughly for your certification!

To determine the maximum monthly house payment approved by a bank based on an income of $90,000 and a maximum debt-to-income (DTI) ratio for housing debt of 28%, it's essential to calculate the maximum allowable housing expenses.

First, calculate the maximum allowable housing debt, which is 28% of the annual income. Here’s how you can do it:

  1. Annual Income: $90,000
  2. Calculate 28% of Annual Income: [ 90,000 \times 0.28 = 25,200 ]

This calculation indicates that a borrower can afford up to $25,200 annually for housing expenses.

  1. Convert Annual Housing Debt to Monthly Housing Payment: [ 25,200 \div 12 = 2,100 ]

This means the maximum monthly house payment that a bank would approve is $2,100. This figure reflects the maximum housing debt allowed under the specified debt-to-income ratio.

Understanding debt-to-income ratios is crucial for aspiring homeowners and those entering the real estate market, as it directly impacts the approval of mortgage applications and helps ensure borrowers do not overextend financially.

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