A borrower earns $7,500 gross per month. The proposed housing payment is $1,800 and other counted monthly debts total $600. What is the back-end DTI?
Correct Answer
A) 32%
Why this is correct: Back-end DTI is calculated as total monthly debt obligations divided by gross monthly income. First, sum the proposed housing payment ($1,800) and other counted monthly debts ($600) to find total obligations: $1,800 + $600 = $2,400. Then divide by the gross monthly income of $7,500: $2,400 ÷ $7,500 = 0.32, or 32%. Why the other choices are wrong: - "24%" is incorrect because $2,400 ÷ $7,500 equals 0.32, not 0.24. - "40%" is incorrect because $2,400 ÷ $7,500 equals 0.32, not 0.40. - "45%" is incorrect because $2,400 ÷ $7,500 equals 0.32, not 0.45. Exam tip: Always ensure you have added all counted debts correctly before performing the division. Misadding is a common source of error.
Why This Is the Correct Answer
Why this is correct: Back-end DTI is calculated as total monthly debt obligations divided by gross monthly income. First, sum the proposed housing payment ($1,800) and other counted monthly debts ($600) to find total obligations: $1,800 + $600 = $2,400. Then divide by the gross monthly income of $7,500: $2,400 ÷ $7,500 = 0.32, or 32%. Why the other choices are wrong: - "24%" is incorrect because $2,400 ÷ $7,500 equals 0.32, not 0.24. - "40%" is incorrect because $2,400 ÷ $7,500 equals 0.32, not 0.40. - "45%" is incorrect because $2,400 ÷ $7,500 equals 0.32, not 0.45. Exam tip: Always ensure you have added all counted debts correctly before performing the division. Misadding is a common source of error.
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