Question

Joe Smith earns $72,000 per year. His bank uses a rule that PITI must be equal to or less than one third of gross monthly income. If his home owner's insurance is $100 per month, roughly how much of a monthly payment can Joe afford including taxes over and above the $100 for insurance?

Answer 1

Answer:

Total Monthly payment = $1,900

Explanation:

Given:

Annual earning = $72,000

PITI (Principal, Interest, Taxes,Insurance) = 1/3 of Gross Monthly income

Monthly expenses = $100

Computation:

Gross Monthly income = Annual earning / 12

Gross Monthly income = $72,000 / 12

Gross Monthly income = $6,000

PITI (Principal, Interest, Taxes,Insurance) = 1/3 of Gross Monthly income

PITI (Principal, Interest, Taxes,Insurance) = 1/3 × ($6,000)

PITI (Principal, Interest, Taxes,Insurance) = $2,000

Total Monthly payment = PITI - Monthly expenses

Total Monthly payment = $2,000 - $100

Total Monthly payment = $1,900