Question

You work for a lender that requires a 15% down payment and uses the standard debt-to-income ratio to determine a person's eligibility for a home loan. Of the following, choose the person that you would rate the highest on their eligibility for a home loan.

Person A
Person B
Person C
Person D
home value
$95,000
$107,000
$120,000
$128,000
income
$46,000
$53,000
$58,000
$60,000
savings
$20,000
$13,910
$18,000
$19,200
recurring debt
$310
$198
$265
$400

a.
Person A
b.
Person B
c.
Person C
d.
Person D

Answer 1

c. Person C

Reason: B cannot make the required 15% down payment (needs $16,050 but has $13,910). A, C and D meet the 15% down payment. Compare recurring-debt-to-gross-monthly-income:

- A: 310 / (46,000/12) = 310 / 3,833.33 = 8.09%
- C: 265 / (58,000/12) = 265 / 4,833.33 = 5.48%
- D: 400 / (60,000/12) = 400 / 5,000 = 8.00%

C has the lowest debt-to-income percentage, so C is most eligible.