CMPS Debt and Cash Flow Management 4

Question 1

A self-employed borrower reports $120,000 in gross business revenue and $80,000 in business expenses on Schedule C. What income is used for mortgage qualifying?

Accepted Answer

$40,000

Answer

Net self-employment income ($120,000 - $80,000 = $40,000) is used for qualifying, subject to a 2-year average.

Question 2

A borrower's monthly housing expense is $2,100 and gross monthly income is $7,000. What is their front-end DTI ratio?

Accepted Answer

30%

Answer

$2,100 / $7,000 = 0.30, or 30% front-end DTI.

Question 3

Which type of debt is typically weighted most heavily in a CMPS cash flow optimization analysis because of its high average interest rate?

Accepted Answer

Revolving credit card debt

Answer

Revolving credit card debt typically carries the highest interest rates (18–29%+), making it the priority target in cash flow optimization.

Question 4

A client earns $5,000/month and has a $400 car payment, $200 student loan payment, and a proposed mortgage PITI of $1,500. What is the back-end DTI?

Accepted Answer

42%

Answer

($400 + $200 + $1,500) / $5,000 = $2,100 / $5,000 = 42% back-end DTI.

Question 5

What is the primary financial risk of using a HELOC to manage revolving consumer debt?

Accepted Answer

Variable interest rates and home equity as collateral create foreclosure risk

Answer

HELOCs are secured by the home and often have variable rates, meaning a rate spike could jeopardize homeownership.

(CMPS) Certified Mortgage Planning Specialist Practice Test

(CMPS) Certified Mortgage Planning Specialist Practice Test

CMPS Debt and Cash Flow Management 4