Question

gina would like to apply for a loan, but knows that her current debt-to-income (dti) ratio will keep her from being approved. her current monthly debt includes a rent payment of \\$950.00, a car payment of \\$238.00, a student loan payment of \\$149.00, and two credit cards with a combined minimum monthly payment of \\$78.00. the bank requires a dti of 36\\% in order to approve ginas loan application. what would ginas gross monthly income need to be to get approved for the loan?
a. at least \\$2,855.56
b. at least \\$2,638.89
c. at least \\$3,713.89
d. at least \\$3,930.56

Explanation:

Calculate total monthly debt

$$ \text{Total Debt} = 950.00 + 238.00 + 149.00 + 78.00 = 1415.00 $$

Set up debt-to-income inequality

$$ \frac{1415.00}{\text{Gross Monthly Income}} \le 0.36 $$

Solve for minimum gross monthly income

$$ \text{Gross Monthly Income} \ge \frac{1415.00}{0.36} \approx 3930.5556 $$

Answer:

• a. at least $2,855.56
• b. at least $2,638.89
• c. at least $3,713.89
• d. at least $3,930.56 (Correct answer)