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

Question

Quizplus · Accepted Answer

Total Debt Ratio = (Principle + Interest + Tax + Insurance + Car Lease) / Gross Monthly Income
Total Debt Ratio = ($635 + $125 + $350) / $2,500
Total Debt Ratio = $1,110 / $2,500
Total Debt Ratio = 0.444 or 44.4%

Therefore, the correct answer is C) 44.4%.

In Ascertaining Whether a Borrower Has the Ability to Pay