Real estate finance 7

Determining the Ability to Pay a Mortgage

Housing expense ratio = PITI (monthly mortgage principal, interest, property tax and hazard insurance in an escrow account) divided by Gross Monthly Income (GMI).

The housing expense ratio should not exceed 28%.

The Debt-to-Income Ratio should not exceed 36% depending on the lender. Debt-to-Income Ratio = Your PITI plus monthly debt divided by your GMI.