What is the maximum PITI calculation for DTI ratio based on gross monthly income?

The maximum PITI (Principal, Interest, Taxes, and Insurance) calculation for the Debt-to-Income (DTI) ratio is correctly represented by multiplying the Gross Monthly Income by a percentage that reflects the maximum allowable portion of income that should go toward housing-related expenses.

Using 40% as a benchmark aligns with the typical guidelines for maximum housing expenses that lenders consider acceptable in relation to a borrower's gross income. By taking Gross Monthly Income and multiplying it by 40%, you establish the total amount available for both housing costs and current monthly debts.

Importantly, subtracting monthly debts from this figure helps determine how much room is left for the housing costs (PITI), ensuring that the total monthly expenditure does not exceed a manageable level for the borrower. Thus, by calculating it this way, you ensure an accurate estimation of the housing budget relative to existing financial obligations. This assists lenders in evaluating the borrower's ability to meet future mortgage payments without compromising other essential financial responsibilities.