The debt-to-income analysis should assess a borrower’s total monthly housing related payments as a percentage of the:

The debt-to-income analysis should assess a borrower’s total monthly housing related payments as a percentage of the:
A . net monthly income
B . gross monthly income.
C . taxable income.
D . loan amount.

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Answer: B

Explanation:

In a debt-to-income (DTI) analysis, the borrower’s total monthly housing-related payments (including principal, interest, taxes, insurance, and any homeowner association fees) are assessed as a percentage of their gross monthly income. Lenders use the gross income, which is the borrower’s income before taxes and deductions, to determine affordability and creditworthiness.

Net monthly income (A) and taxable income (C) are not used in standard DTI calculations.

The loan amount (D) is unrelated to the DTI calculation.

References:

Fannie Mae and Freddie Mac Guidelines on DTI ratios

CFPB Guidelines on Ability-to-Repay and DTI