A potential borrower has a gross annual income of $80,000, property taxes of $3,600 annually, and heating costs of $1,800 annually. They have a pre-existing car loan payment of $400 per month and a credit card minimum payment of $100 per month. If the maximum allowable Gross Debt Service (GDS) ratio is 32% and the maximum allowable Total Debt Service (TDS) ratio is 40% with a qualifying rate of 5.25% for a 25-year amortization, what is the maximum monthly principal and interest payment (P&I) they can qualify for based solely on GDS?

Question: A potential borrower has a gross annual income of $80,000, property taxes of $3,600 annually, and heating costs of $1,800 annually. They have a pre-existing car loan payment of $400 per month and a credit card minimum payment of $100 per month. If the maximum allowable Gross Debt Service (GDS) ratio is 32% and the maximum allowable Total Debt Service (TDS) ratio is 40% with a qualifying rate of 5.25% for a 25-year amortization, what is the maximum monthly principal and interest payment (P&I) they can qualify for based solely on GDS?

Answer options:

• $1,800.00
• $1,813.33 ✅ $1,933.33
• $2,400.00

Correct answer: $1,933.33

Explanation: The maximum allowable GDS is 32% of the gross monthly income. First, calculate the gross monthly income: $80,000 / 12 = $6,666.67. Next, calculate the maximum allowable GDS: $6,666.67 * 0.32 = $2,133.33. Then, subtract the monthly property taxes ($3,600 / 12 = $300) and monthly heating costs ($1,800 / 12 = $150) to find the maximum P&I: $2,133.33 - $300 - $150 = $1,933.33.