In the example, using a front ratio of 28%, what is the maximum monthly housing payment for a gross annual income of 96,500?

In the example, using a front ratio of 28%, what is the maximum monthly housing payment for a gross annual income of 96,500?

• A. 2,252
• B. 2,600
• C. 3,000
• D. 1,800

Answer: (A)

Front-end ratio shows what portion of gross income can go toward housing each month. With a 28% front-end, the maximum monthly housing payment equals 28% of the gross monthly income. First, find the gross monthly income: 96,500 ÷ 12 = 8,041.67. Then multiply by 0.28: 8,041.67 × 0.28 = 2,251.67. Rounded to the nearest dollar, that's 2,252. So the maximum monthly payment is 2,252. The other options either exceed the 28% limit (2,600 and 3,000) or fall below it (1,800), making 2,252 the correct maximum under this ratio.

Front-end ratio shows what portion of gross income can go toward housing each month. With a 28% front-end, the maximum monthly housing payment equals 28% of the gross monthly income. First, find the gross monthly income: 96,500 ÷ 12 = 8,041.67. Then multiply by 0.28: 8,041.67 × 0.28 = 2,251.67. Rounded to the nearest dollar, that's 2,252. So the maximum monthly payment is 2,252. The other options either exceed the 28% limit (2,600 and 3,000) or fall below it (1,800), making 2,252 the correct maximum under this ratio.