CMPS Debt and Cash Flow Management 2

Question 1

A borrower has a gross monthly income of $8,000 and total monthly debt obligations of $3,200. What is their debt-to-income (DTI) ratio?

Accepted Answer

40%

Answer

35%

Answer

45%

Answer

50%

Question 2

Which cash flow analysis technique compares a borrower's monthly income against all recurring obligations to determine mortgage affordability?

Accepted Answer

Residual income analysis

Answer

Net worth analysis

Answer

Debt service coverage ratio

Answer

Liquidity ratio

Question 3

A client wants to pay off a $20,000 auto loan with 48 months remaining before applying for a mortgage. The monthly payment is $450. How would eliminating this debt affect their qualifying income requirement?

Accepted Answer

It reduces gross income needed to qualify by approximately $1,500/month

Answer

It reduces the required income by $450/month

Answer

It increases the required gross income by $450/month

Answer

It has no effect on qualifying income

Question 4

Under conventional lending guidelines, what is the maximum allowable back-end DTI ratio for standard loan approval?

Accepted Answer

50%

Answer

36%

Answer

41%

Answer

43%

Question 5

Which of the following items is included in the back-end DTI ratio calculation but NOT the front-end DTI ratio?

Accepted Answer

Monthly car payment

Answer

Principal and interest

Answer

Property taxes

Answer

Homeowner's insurance

Question 6

A mortgage planning specialist recommends a debt consolidation refinance to a client. Which primary risk must be disclosed?

Accepted Answer

Unsecured debt becomes secured by the home

Answer

Credit score will permanently decline

Answer

The new rate will always be higher

Answer

Monthly payments will increase in all scenarios

Question 7

A borrower's net monthly income is $6,000 after taxes. Their total monthly expenses including the proposed mortgage are $4,200. What is their monthly cash surplus?

Accepted Answer

$1,800

Answer

$1,200

Answer

$2,400

Answer

$900