A borrower has gross monthly income of $6,000. The proposed housing payment plus all counted monthly debts total $2,100. What is the back-end DTI?
Correct Answer
D) 35%
Why this is correct: The back-end debt-to-income (DTI) ratio is a key underwriting metric calculated by dividing the borrower's total monthly debt obligations by their gross monthly income. Here, total monthly obligations are given as $2,100, and gross monthly income is $6,000. The calculation is $2,100 ÷ $6,000 = 0.35, which equals 35%. Why the other choices are wrong: - "28%" is incorrect because $2,100 ÷ $6,000 does not equal 0.28. - "30%" is incorrect because $2,100 ÷ $6,000 equals 0.35, not 0.30. - "32%" is incorrect because $2,100 ÷ $6,000 equals 0.35, not 0.32. Exam tip: For DTI questions, identify the correct total monthly debt (the back-end includes housing payment plus all other counted debts) and divide by gross monthly income. Multiply the decimal result by 100 to get the percentage.
Why This Is the Correct Answer
Why this is correct: The back-end debt-to-income (DTI) ratio is a key underwriting metric calculated by dividing the borrower's total monthly debt obligations by their gross monthly income. Here, total monthly obligations are given as $2,100, and gross monthly income is $6,000. The calculation is $2,100 ÷ $6,000 = 0.35, which equals 35%. Why the other choices are wrong: - "28%" is incorrect because $2,100 ÷ $6,000 does not equal 0.28. - "30%" is incorrect because $2,100 ÷ $6,000 equals 0.35, not 0.30. - "32%" is incorrect because $2,100 ÷ $6,000 equals 0.35, not 0.32. Exam tip: For DTI questions, identify the correct total monthly debt (the back-end includes housing payment plus all other counted debts) and divide by gross monthly income. Multiply the decimal result by 100 to get the percentage.
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