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A first time home buyer has a car payment of $485\$485 per month, a student loan with monthly payments of $78.50\$78.50, a court ordered child support obligation of $600\$600 per month, and a minimum credit card payment of $121\$121 per month. What is the maximum PITI payment for which she can qualify on her monthly gross salary of $5,500\$5,500 using Fannie Mae‘s 2828/3636 ratios?

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Full solution

Q. A first time home buyer has a car payment of $485\$485 per month, a student loan with monthly payments of $78.50\$78.50, a court ordered child support obligation of $600\$600 per month, and a minimum credit card payment of $121\$121 per month. What is the maximum PITI payment for which she can qualify on her monthly gross salary of $5,500\$5,500 using Fannie Mae‘s 2828/3636 ratios?
  1. Calculate total debt payments: question_prompt: What's the max PITI payment she can qualify for with her salary and debts, using the 28/3628/36 rule?
  2. Find 3636\% of gross salary: Calculate total monthly debt payments by adding car payment, student loan payment, child support, and credit card payment.$485\$485 (car) + $78.50\$78.50 (student loan) + $600\$600 (child support) + $121\$121 (credit card) = $1284.50\$1284.50
  3. Subtract debt payments for max PITI: Find 36%36\% of the monthly gross salary because Fannie Mae's rule allows up to 36%36\% of income to be used for total debt payments.\newline$5,500×0.36=$1,980\$5,500 \times 0.36 = \$1,980
  4. Check 2828\% limit: Subtract total monthly debt payments from 3636\% of monthly gross salary to find the max PITI payment.$1,980−$1,284.50=$695.50\$1,980 - \$1,284.50 = \$695.50
  5. Determine max PITI payment: Check if the max PITI payment is less than 28%28\% of the monthly gross salary, because it also needs to be within this limit.\newline$5,500×0.28=$1,540\$5,500 \times 0.28 = \$1,540
  6. Determine max PITI payment: Check if the max PITI payment is less than 28%28\% of the monthly gross salary, because it also needs to be within this limit.\newline$5,500×0.28=\$5,500 \times 0.28 = 11,540540\) Since $695.50\$695.50 is less than 11,540540\), the max PITI payment she can qualify for is $695.50\$695.50, as it is within both the \)2828\%and and 3636\%$ limits.

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