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

$3,200 / $8,000 = 0.40, or 40% DTI.

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

Residual income analysis measures income remaining after all monthly obligations, a key VA loan underwriting tool.

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

Removing a $450/month debt obligation reduces the gross income needed to support it by roughly $1,500/month at a 30% back-end DTI ratio.

Question 4

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

Accepted Answer

50%

Answer

Fannie Mae allows up to 50% DTI with compensating factors for conventional loans.

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

Back-end DTI includes all monthly debt obligations; front-end DTI includes only housing-related expenses.

(CMPS) Certified Mortgage Planning Specialist Practice Test

(CMPS) Certified Mortgage Planning Specialist Practice Test

CMPS Debt and Cash Flow Management 2