What percentage of income is used to reduce PITI for vacant units according to the affordability calculation rule?

The affordability calculation rule establishes guidelines for assessing the income that can be used to reduce Principal, Interest, Taxes, and Insurance (PITI) for vacant units. Under this rule, utilizing 75% of a household's income is pivotal because it reflects a realistic approach to managing financial obligations while accounting for the costs associated with vacant units. This percentage ensures that potential rental income considerations are balanced with the risks and challenges that come from having units vacant.

Choosing 75% allows enough leeway to maintain a sustainable budget while recognizing that not all income will necessarily be available to cover housing costs, especially in situations where units may not be generating income. This percentage acknowledges the nuances of vacancy rates, potential repairs, or other related expenses. By applying 75% to the affordability calculation, lenders and housing authorities can offer a more accurate assessment of financial readiness and stability for the prospective buyer or tenant.