Question 12
Domain 2: Mortgage Loan Origination ActivitiesA borrower earns $6,500 per month gross income. Using a 28% front-end ratio, what is the maximum monthly housing payment?
Correct answer: B
Explanation
A 28% front-end ratio means the housing payment can be no more than 28% of gross monthly income. Multiplying "$6,500 per month gross income" by 0.28 gives $1,820, so the maximum monthly housing payment is $1,820.
Why each option is right or wrong
A. $$1,560
B. $$1,820
Under the standard front-end qualifying ratio used in mortgage underwriting, the housing expense limit is calculated as a percentage of gross monthly income. Applying the stated 28% ratio to $6,500 gives $6,500 × 0.28 = $1,820, so any monthly housing payment above that would exceed the permitted threshold.
C. $$2,080
D. $$2,340