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4 August, 04:38

Joe Smith earns $72,000 per year. His bank uses a rule that PITI must be equal to or less than one third of gross monthly income. If his home owner's insurance is $100 per month, roughly how much of a monthly payment can Joe afford including taxes over and above the $100 for insurance?

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  1. 4 August, 07:36
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    Total Monthly payment = $1,900

    Explanation:

    Given:

    Annual earning = $72,000

    PITI (Principal, Interest, Taxes, Insurance) = 1/3 of Gross Monthly income

    Monthly expenses = $100

    Computation:

    Gross Monthly income = Annual earning / 12

    Gross Monthly income = $72,000 / 12

    Gross Monthly income = $6,000

    PITI (Principal, Interest, Taxes, Insurance) = 1/3 of Gross Monthly income

    PITI (Principal, Interest, Taxes, Insurance) = 1/3 * ($6,000)

    PITI (Principal, Interest, Taxes, Insurance) = $2,000

    Total Monthly payment = PITI - Monthly expenses

    Total Monthly payment = $2,000 - $100

    Total Monthly payment = $1,900
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