A borrower is paid $27.40 an hour for a guaranteed 40-hour week, 52 weeks a year, with no overtime. What is the borrower's gross monthly income when annual earnings are divided by 12?
Correct Answer
C) Monthly qualifying income of $4,749.33, which is the year over 12
C. Gross monthly income is $4,749.33. $27.40 × 40 = $1,096 weekly. Multiply by 52 to obtain $56,992 annually. $56,992 ÷ 12 = $4,749.333…, rounded to cents only at the end. Scope and exceptions: The question guarantees hours and weeks. Variable hours, employment verification and income eligibility need separate review; this arithmetic is not a loan approval. Source: B3-3.3-01, Fixed Base Income, hourly conversion — https://selling-guide.fanniemae.com/sel/b3-3.3-01/base-income
Why This Is the Correct Answer
C. Gross monthly income is $4,749.33. $27.40 × 40 = $1,096 weekly. Multiply by 52 to obtain $56,992 annually. $56,992 ÷ 12 = $4,749.333…, rounded to cents only at the end. Scope and exceptions: The question guarantees hours and weeks. Variable hours, employment verification and income eligibility need separate review; this arithmetic is not a loan approval.
Why the Other Options Are Wrong
Option A: Monthly qualifying income of $4,384.00, taking 4 weeks in the month
Four weeks per month counts only 48 weeks over a year.
Option B: Monthly qualifying income of $5,480.00, counting 5 weeks in a month
Five weeks per month counts 60 weeks over a year.
Option D: Monthly qualifying income of $2,192.00, using a 2-week pay period
$2,192 is two weeks of pay, not monthly income.
Exam Tip
Convert weekly pay to annual pay, then to a monthly average.
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