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15 January, 08:43

If the total debt ratio is 36%, and the allowable mortgage debt ratio is 28%, which of the following debt ratios would a loan applicant qualify for if:

a. The loan applicant's gross monthly income is $2,500, with a mortgage payment of $600

b. A car payment of $250, and minimum monthly credit card payment of $75

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  1. 15 January, 09:00
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    The loan applicant would qualify for the mortgage debt ratio in option a because his mortgage debt ratio is 24% and the allowable mortgage debt ratio is 28%.

    Explanation:

    First, you have to calculate the debt ratio in each case. It is calculated by dividing the total debt by the income.

    a. Debt = $600

    Income = $2,500

    Mortgage debt ratio=600/2,500 = 0.24→24%

    b. Debt=$600+$250+$75=$925

    Income=$2,500

    Total Debt ratio=925/2,500 = 0.37→37%

    The loan applicant would qualify for the mortgage debt ratio because his mortgage debt ratio is 24% and the allowable mortgage debt ratio is 28%. The loan applicant would not qualify for the total debt ratio because his ratio is 37% and the allowable total debt ratio is 36%.
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