Lenders will not allow borrowers to spend more than what percentage of their monthly income on PITI?

Lenders typically set guidelines to ensure that borrowers do not overextend themselves financially, particularly when it comes to home financing. The percentage of a borrower's monthly income that can be allocated to PITI, which stands for Principal, Interest, Taxes, and Insurance, is often capped to prevent financial strain.

The correct choice of 28% reflects a standard practice in the lending industry. This guideline suggests that borrowers should ideally not spend more than 28% of their gross monthly income on housing-related expenses. This figure is based on the idea that maintaining housing costs within a manageable range helps to ensure that borrowers can meet their other financial obligations and achieve long-term financial stability.

Setting a limit at 28% balances both the lender's risk and the borrower's capacity to repay. When borrowers exceed this threshold, they might face difficulties in managing other necessary expenses such as utilities, transportation, and other debts, which can lead to financial distress. Thus, this percentage serves as a guideline for responsible borrowing and prudent financial management.