Question

You work for a lender that requires a 20% down payment and uses the standard debt-to-income ratio to determine

Answer 1

According to the standard debt-to-income ratio, the person who would be rated as highest in respect of eligibility for a home loan is person C.

What is a home loan?

A home loan is an amount that has been lent for the acquisition or purchase of any house. or apartment for living.

Given values:

Persons                   Monthly Incomes           Recurring debts

Person A                    $4,250 ($51,000 / 12)               $350

Person B                     $4,833 ($58,000 / 12)              $250

Person C                     $5,250 ($63,000 / 12)             $200

Person D                     $5,583 ($67,000 / 12)             $450

Step-1 Computation of debt-to-income ratio of person A:

$\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\rm\ Recurring \rm\ debt}{\rm\ Income}\\ \rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\ 350}{\ 4,250}\\\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=8.23\%$

Step-2 Computation of debt-to-income ratio of person B:

$\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\rm\ Recurring \rm\ debt}{\rm\ Income}\\ \rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\ 250}{\ 4,833}\\\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=5.18\%$

Step-3 Computation of debt-to-income ratio of person C:

$\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\rm\ Recurring \rm\ debt}{\rm\ Income}\\ \rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\ 200}{\ 5,250}\\\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=3.80\%$

Step-4 Computation of debt-to-income ratio of person D:

$\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\rm\ Recurring \rm\ debt}{\rm\ Income}\\ \rm\ Debt \rm\ to \rm\ Income \rm\ ratio=\frac{\ 450}{\ 5,583}\\\rm\ Debt \rm\ to \rm\ Income \rm\ ratio=8.06\%$

Therefore, after finding debt to income ratios of all persons, the lowest ratio comes out to be of Person C at 3.80% which ranked to be the highest.

Learn more about the debt ratio in the related link:

brainly.com/question/14553933

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Answer 2

Based on the standard debt-to-income ratio, the person with the highest eligibility rating would be Person C.

Why would Person C rank highest?

The person that ranks highest would be the person with the lowest debt-to-income ratio:

Person 1:

= 350 / (51,000 / 12 months)

= 8.23%

Person 2:

= 250 / (58,000 / 12)

= 5.17%

Person 3:

= 200 / (63,000 / 12)

= 3.8%

Person 4:

= 450 / (67,000 / 12)

= 8.06%

In conclusion, Person C will rank highest.

Find out more on debt-to-income ratio at brainly.com/question/2610819.

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