The lender's underwriting criteria allows a housing expense to income ratio of 33% and a total debt service ratio of up to 38%. With a gross annual income of $100,000, what is the maximum PITI the lender will approve?

To determine the maximum principal, interest, taxes, and insurance (PITI) the lender will approve based on the given underwriting criteria, we first need to focus on the housing expense to income ratio.

The lender allows a housing expense to income ratio of 33%. This means that the maximum percentage of the borrower's gross income that can be allocated to housing costs (PITI) is 33%. Given a gross annual income of $100,000, we calculate the maximum monthly PITI as follows:

1. Calculate the annual maximum housing expense:

[

\text{Maximum Housing Expense} = \text{Gross Annual Income} \times \text{Housing Expense Ratio}

]

[

\text{Maximum Housing Expense} = 100,000 \times 0.33 = 33,000

]

2. Convert this annual housing expense into a monthly amount:

[

\text{Maximum Monthly PITI} = \frac{33,000}{12} = 2,750

]

Next, we also look at the total debt service ratio, which allows up to 38% of the gross income to be used for all debt obligations, including PITI as