Applying for a Loan

Bob would like to get his debt-to-income (DTI) ratio down to 36%. His current monthly expenses are outlined in the chart below. He would like to lower his DTI by paying off some of his credit card debt, lowering his combined minimum monthly credit card payment. What would Bob's minimum monthly credit card payment need to be in order to reach his DTI goal of 36%? Bob's Monthly Debt and Income Housing: Mortgage- $1,250.00 (including mortgage insurance and property taxes) Credit: Auto Loan- $349.00 Credit Cards (combined)- $348.00(minimum) Income: Manager- $4,800.00 Interest- $130.00 a. $175.80 b. $129.00 c. $228.00 d. $274.80

a. $175.80

If denied a loan, which of the following changes to your application process will not increase your chances of approval when you re-apply? a. Apply for a larger loan amount. b. Increase your gross monthly income. c. Have a cosigner apply for the loan with you. d. Eliminate some of your debt before you re-apply.

a. Apply for a larger loan amount.

Which of the following is likely to keep Harry from being approved for a loan? a. Harry's debt-to-income is a stable 39%. b. Harry's credit score currently sits at 702. c. Harry has a gross monthly income of $3800. d. Harry was able to offer his vacation home as collateral for the loan.

a. Harry's debt-to-income is a stable 39%.

John just moved out of state and, in doing so, had to take a salary cut. At his previous job, his annual salary was $47,000 and his monthly expenses included an $850 rent payment, a $325 car payment, and $375 in minimum credit card payments. His new job has a salary of $43,500. He has the same car payment and minimum credit card payments, but his new apartment costs a mere $625 per month. How did John's move affect his debt-to-income (DTI) ratio? a. John's DTI ratio decreased by 3%. b. John's DTI ratio increased by 3%. c. John's DTI ratio decreased by 9%. d. John's DTI ratio increased by 9%.

a. John's DTI ratio decreased by 3%.

A lender will verify and carefully consider your income before approving you for a loan because _____. a. they need to be sure you will be able to pay the loan back b. government restrictions require a minimum salary to be approved for a loan c. loan applicants with higher salaries are generally more trustworthy than other applicants d. they need to be sure you make at least the minimum payment for the loan you applied for

a. they need to be sure you will be able to pay the loan back

Tom was recently turned down for a loan. He would like to re-apply next year for the same loan. Which of the following is not a change he could make to increase his chances of being approved for the loan? a. Pay off some of his credit cards to decrease his debt-to-income ratio. b. Take out some more credit cards to increase his monthly debt. c. Find another job that pays more, increasing his gross monthly income. d. Improve his credit score by making all credit card and loan payments on time.

b. Take out some more credit cards to increase his monthly debt.

Trish is having trouble understanding why she was not approved for her loan. Which of the following probably kept Trish from getting her loan? a. Trish's debt-to-income (DTI) is currently 30%. b. Trish's credit score is a solid 525. c. Trish is a single mom with three kids. d. Trish's gross monthly income is only $2,800.

b. Trish's credit score is a solid 525.

Which of the following is something you would not expect to see on a basic loan application? a. employer's name and address b. doctor's name and address c. annual or monthly income d. current monthly rent or mortgage payment

b. doctor's name and address

Lenders look at the credit score of a loan applicant in order to _____. a. verify the applicant's annual gross income b. ensure that the applicant is financially responsible c. ensure that the applicant's credit score is as high as possible d. see what types of loans the applicant has applied for in the past

b. ensure that the applicant is financially responsible

Kurtis is expecting a promotion which, hopefully, comes with a raise. He would like his raise to help him correct a high debt-to-income (DTI) ratio of 43%. His current annual salary is $53,000. How much of a raise would Kurtis need applied to his annual salary to get his DTI ratio down to a more reasonable 36%? a. $4,437 b. $8,627 c. $10,305 d. $63,305

c. $10,305

Johnny's monthly expenses and income are listed below. Calculate Johnny's debt-to-income (DTI) ratio. Johnny's Monthly Debt and Income Housing: Rent - $950.00 Renter's Insurance - $25.00 Credit: Student - $250.00 Car - $239.00 Credit Card #1 - $25.00 (minimum) Credit Card #2 - $40.00 (minimum) Income: Sales Rep - $4,400.00 Tutoring - $600.00 a. 28% b. 33% c. 31% d. 35%

c. 31%

Jim has an annual salary of $96,000. His monthly expenses include a $2,500 mortgage payment, a $250 lease payment, $500 in minimum credit card payments, and a $425 payment on his speed boat. He also receives $1,200 in interest from his savings and other accounts each month. Calculate Jim's DTI (debt-to-income) ratio. a. 30% b. 35% c. 40% d. 45%

c. 40%

In order to approve a loan, lenders want to see a credit score of at least _____. a. 300 b. 500 c. 700 d. 1200

c. 700

Susan just got a promotion that increased her annual salary from $52,000 to $68,000. Susan's monthly expenses included a mortgage payment of $1,500, three minimum credit card payments that total $350, a lease payment of $280, a student loan payment of $250, and a personal loan payment of $325. How did Susan's debt-to-income ratio change with her promotion? a. Susan's debt-to-income ratio decreased by about 2%. b. Susan's debt-to-income ratio increased by about 2%. c. Susan's debt-to-income ratio decreased by about 15%. d. Susan's debt-to-income ratio increased by about 15%.

c. Susan's debt-to-income ratio decreased by about 15%.

Collateral can be beneficial for borrowers when applying for a loan by __________. a. offering lenders additional financial gain if borrowers defaults on their loans b. lessening the total loan amount, making it easier for borrowers to be approved c. giving lenders protection against financial loss and more reason to approve loans d. demonstrating that borrowers have ownership of high-end goods and can obviously make their loan payments

c. giving lenders protection against financial loss and more reason to approve loans

Trudy's monthly expenses are outlined in the chart below. Trudy's job pays her $36,000 annually. Determine Trudy's DTI (debt-to-income) ratio. Trudy's Debt and Income Income: $36,000 (annually) Rent: $695 (monthly) Car Payment $265 (monthly) Student Loan $200 (monthly) Credit Cards $160 (monthly) a. 28% b. 35% c. 37% d. 44%

d. 44%

Sally spends $1,500 each month on her mortgage, mortgage insurance and property taxes. She has three credit cards with minimum monthly payments that total to $125.00 and a monthly car payment for $349.00. She currently brings in a gross monthly income of 3,750.00 from her job. Calculate Sally's debt-to-income (DTI) ratio. a. 40% b. 43% c. 49% d. 53%

d. 53%

How would a bigger down payment be beneficial to borrowers? a. A bigger down payment is only beneficial for a person applying for a home loan. b. A bigger down payment is essentially a bribe to the dealership, guaranteeing a few extra bells and whistles for free. c. A bigger down payment means that the borrower has more money, and can afford a bigger loan. d. A bigger down payment is money paid toward principal, interest free, which also decreases the amount paid monthly.

d. A bigger down payment is money paid toward principal, interest free, which also decreases the amount paid monthly.

Gina would like to apply for a loan, but knows that her current debt-to-income (DTI) ratio will keep her from being approved. Her current monthly debt includes a rent payment of $950.00, a car payment of $238.00, a student loan payment of $149.00, and two credit cards with a combined minimum monthly payment of $78.00. The bank requires a DTI of 36% in order to approve Gina?s loan application. What would Gina's gross monthly income need to be to get approved for the loan? a. at least $2,855.56 b. at least $2,638.89 c. at least $3,713.89 d. at least $3,930.56

d. at least $3,930.56

The debt-to-income (DTI) ratio of a borrower is used to compare _____ to the borrower's gross monthly income. a. monthly credit expenses (credit cards and loans) b. monthly debt expenses from loans (home, personal, auto, student) c. monthly housing expenses (rent or mortgage, homeowner's insurance, property tax, utilities) d. monthly living expenses (rent or mortgage, property tax, mortgage insurance, minimum credit card payments, and monthly loan payments)

d. monthly living expenses (rent or mortgage, property tax, mortgage insurance, minimum credit card payments, and monthly loan payments)