Your PITI plus other debt should be what percent of your gross annual income quizlet

Number of open accounts, total credit limit, types of credit (e.g., credit cards, installment loans), length of credit history (e.g., when opened, latest activity), total amount of debt outstanding, number of late payments in the past 30-60-90 days, presence of adverse public records (e.g., liens, judgments, bankruptcies), number of recent credit inquiries, re-establishment of positive credit history after past payment problems.

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Rationale:
Housing expense ratio: 28%
$3,200 Monthly Gross Income
x 0.28 Income Ratio
= $ 896 Maximum Mortgage PITI Payment

Total debt-to-income ratio: 36%
$3,200 Monthly Gross Income
x 0.36 Income Ratio
$1,152 Maximum Debt
- $220 Car Payment
- $ 75 Personal Loan Payment
- $ 50 Revolving Charge Card Payment
= $ 807 Maximum Mortgage PITI Payment

The maximum monthly mortgage payment Mary can qualify for is $807. Remember, when both ratios are used, Mary must qualify under both ratios, so the lower figure is the most she can afford. The $807 number represents the maximum payment for principal, interest, taxes, and insurance (PITI) plus any other housing obligations, such as Homeowner's Association dues.

Rationale:
If Mary could pay off some of her installment debts and reduce her total long-term monthly obligations, she could improve her debt-to-income ratio and would be able to qualify for a larger mortgage payment.

REMEMBER: 28% (housing expense ratio) - 36% (debt-to-income ratio)
REMEMBER: PITI = sum of principal, interest, taxes, insurance

1. Lisa's monthly income = $18 hourly wage x 40 hours/week x 52 weeks = $37,440 annual income; $37,440 annual income ÷ 12 months = $3,120

Dave's monthly income = $625 weekly income x 52 weeks = $32,500 annual income; $32,500 annual income ÷ 12 months = $2,708.33

Total stable monthly income = $3,120 + $2,708.33 = $5,828.33
Maximum housing expense = $5,828.33 x 0.28 = $1,631.93

2. Maximum debt-to-income allowed = $5,828.33 x 0.36 = $2,098.20
Maximum housing expense = $2,098.20 - $400 (car loan) = $1,698.20
Remember to use the lower monthly payment allowable, which is $1,631.93.

3. Yes. Although Lisa and Dave have only been at their jobs a short time, Lisa had special training in the Air Force and Dave is a vocational nurse, which also implies special training.

1. $700 weekly income x 52 weeks = $36,400 annual income
$36,400 annual income ÷ 12 months = $3,033.33 monthly income
$878 mortgage payment ÷ $3,033.33 monthly income = 0.29 (29% housing expense ratio)

2. $878 mortgage payment + $212 auto payment = $1,090 total debt service
$1,090 total debt service ÷ $3,033.33 monthly income = 0.36 (36% total debt-to-income ratio)

3. Yes, Mr. Able will have a few problems closing this transaction. The equity in his home ($14,000) plus money in the bank ($3,600) equals only $17,600, but his down payment plus estimated closing costs = $18,400. He needs to show two additional months of cash reserves. His housing expense ratio of 29% exceeds guidelines.

4. Yes, Mr. Able's VOD is a problem because his current balance of $3,600 is significantly higher than his average balance of $1,000. He will need to have a good explanation of where the funds came from so the lender knows that he did not borrow the down payment.

a. different levels of risk, depending on the type of fund;
b.invests in many different companies by buying stock in the companies;
c. as value of stocks increases, value of the mutual fund increases;
d. usually has a minimum amount you must initially invest;
e. for income tax purposes, increases in the value of the mutual fund require you to pay "capital gains tax" - 28% the first year, 15% after - only on the increase, not the whole value;
f. often used in retirement accounts, but can also be straight, low-cost, ways to invest in the stock market;
g. you make no decisions once you buy the fund;
h. Types include Aggressive Growth, Growth, Growth and Income, Income, International, Large Cap, Medium Cap, Small Cap...
i. issued by investment companies and sold by brokers

riskier than money market funds, but less risky than stock funds;
invests in bonds (IOUs from a company, a government, an organization;
can have funds that invest in short-term bonds (less than four years), intermediate-term bonds (4 to 10 years), and long-term bonds (10 years or longer);
usually has a minimum amount you must initially invest;
for income tax purposes, often work like stock funds, but some can be tax-free;
often used in retirement accounts, but can also be straight, low-cost, ways to invest in the stock market;
you make no decisions once you buy the fund;
issued by investment companies and sold by brokers

1. Compare quotes online
2. Contact and insurance agent directly.
3. Get the highest deductible you can afford
4. If your employer offers insurance plans (health, vision, dental, life, disability, etc.) - check them out first
5. You must sign up during an "open enrollment" period.
6. If possible, purchase health insurance on a "before-tax" basis
7. Use a Flexible Spending Account (FSA) or a Health Savings Account (HSA), but don't "overfund" it.
8. For FSA or HSA, can set up on a before tax basis. Can be used for any type of medical care. Often, if you don't use it, you lose it.