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 Gina?s loan application. What would Gina's gross monthly income need to be to get approved for the loan?

Answer 1

$3930.56

Explanation:

The sum of her required payments is ...

$950 +238 +149 +78 = $1415

In order for that to be 36% of her income, she must have income that matches ...

1415 = 0.36 × income . . . . . . . to solve, we divide this equation by 0.36

1415/0.36 = income ≈ 3930.56

Gina's gross monthly income would need to be $3930.56 to get approved.

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Comment on this answer

Often the DTI calculation will include the proposed loan payment. If that is the case, we would need to know the amount of the payment on the loan Gina is applying for. That amount would be added to her existing debt before dividing by 0.36.