If the front-end and back-end calculations produce different maximum PITI values, which value should be used?

If the front-end and back-end calculations produce different maximum PITI values, which value should be used?

• A. The higher value
• B. The lower value
• C. The average value
• D. Ignore both values and use fixed percentage

Answer: (B)

When qualifying a loan, you must satisfy both the front-end housing expense ratio and the back-end total debt ratio. If the front-end and back-end calculations yield different maximum PITI amounts, you take the stricter limit—the smaller value—so the borrower's housing payment fits within the front-end cap and the total debt payments fit within the back-end cap. Using the higher value could push either ratio over its limit, which wouldn’t be compliant. The average or ignoring the values, or applying a fixed percentage, isn’t appropriate because the program’s specific ratio limits must be met.

When qualifying a loan, you must satisfy both the front-end housing expense ratio and the back-end total debt ratio. If the front-end and back-end calculations yield different maximum PITI amounts, you take the stricter limit—the smaller value—so the borrower's housing payment fits within the front-end cap and the total debt payments fit within the back-end cap. Using the higher value could push either ratio over its limit, which wouldn’t be compliant. The average or ignoring the values, or applying a fixed percentage, isn’t appropriate because the program’s specific ratio limits must be met.