You are pre-qualifying a borrower for a purchase loan with monthly debts of $950 and a gross monthly income of $5,200. What is the maximum qualifying house payment on a conventional loan?

To determine the maximum qualifying house payment for a conventional loan, it's essential to use standard debt-to-income (DTI) ratios that lenders typically apply. For conventional loans, lenders often look for a DTI ratio of no more than 28% for housing expenses and a total DTI ratio of around 36% to 43% depending on the lender's guidelines.

In this scenario, the borrower has a gross monthly income of $5,200. To find the maximum allowable house payment based on the 28% rule, we calculate:

0.28 x $5,200 = $1,456

This figure represents the maximum monthly housing payment allowed, including principal, interest, property taxes, and homeowners' insurance.

Next, we also need to consider the borrower's existing monthly debts of $950. To find the total debt service ratio, we add this figure to our calculated housing payment:

If we were to apply a total DTI ratio typically at a maximum of 36% to 43% (let's use 36% here for a conservative estimate):

0.36 x $5,200 = $1,872 (this is the total maximum allowable debt payment, including housing expenses and other debts)

To find the maximum