In Ascertaining Whether a Borrower Has the Ability to Pay

question 19

Multiple Choice

In ascertaining whether a borrower has the ability to pay off his loan over time,a mortgage bank may rely on calculating a total debt ratio as part of its underwriting process.Utilizing the following information,calculate the total debt ratio.Principle and interest: $635,Tax and insurance: $125,Car lease: $350,Gross monthly income: $2,500

• A)25.4%
• B)30.4%
• C)44.4%
• D)53.2%

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Definitions:

Labor

Human effort, whether physical or mental, used in the production of goods and services.

Circular-Flow Diagram

A pictorial scheme of the economy, focusing on the exchange of dollars between households and firms through the market system.

Product Market

The marketplace where final goods or services are traded between sellers and consumers.

Circular-Flow Diagram

A visual model that illustrates the flow of goods and services and money between households and firms in an economy.