In home mortgage lending, it is common for lenders to specify a maximum housing cost (PITI) ratio of 28% to 33% of monthly gross income. Assume a housing cost ratio of 30% and the borrower qualification data below.
House Price 400,000
Down Payment 5% (20,000)
Loan amount 380,000
Loan Payment 6.50% 2,402
Taxes 400
Insurance 133
Montly Housing Cost 2935
Monthly Income Required 9784
What DCR is the lender effectively applying to the borrower?