Question

You work for a lender that requires a 20% 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
$175,000
$200,000
$220,000
$250,000
income
$51,000
$58,000
$63,000
$67,000
savings
$35,000
$40,000
$42,000
$50,000
recurring debt
$350
$250
$200
$450

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



Please select the best answer from the choices provided


A
B
C
D

Answer 1

B

Reason: Persons A, B, and D each have the required 20% down payment; C does not (needs $44,000 but has $42,000). Of the qualified three, B has the lowest recurring-debt-to-income ratio:

- A: 20% down = $35,000 (savings OK). DTI = $350 / ($51,000/12) = 8.24%
- B: 20% down = $40,000 (savings OK). DTI = $250 / ($58,000/12) = 5.17%
- D: 20% down = $50,000 (savings OK). DTI = $450 / ($67,000/12) = 8.06%

Thus Person B is the most eligible.