PSI Oklahoma Real Estate Practice Test

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Prepare for the PSI Oklahoma Real Estate Test. Access flashcards and multiple choice questions, each with hints and explanations. Excel in your exam!

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Based on an FHA debt ratio of 41%, how much can a borrower pay for housing expenses if they earn $4,000 monthly and have $600 in monthly debt obligations?

$800.
$940.
$1,040.
$1,200.

The correct answer is: $1,040.

To determine how much a borrower can pay for housing expenses based on an FHA debt ratio of 41%, it is essential to understand the concept of debt-to-income (DTI) ratios. The FHA typically allows a maximum DTI ratio of 41%, which includes all monthly debt obligations, such as housing expenses (mortgage payment, property taxes, insurance) and any other debts. First, calculate the total allowable monthly debt amount using the borrower’s income. If the borrower earns $4,000 a month, the maximum total debt payments allowed at a 41% DTI ratio would be: Total allowable debt = Monthly income × Debt ratio Total allowable debt = $4,000 × 0.41 = $1,640. Now, since the borrower has $600 in existing monthly debt obligations, we need to subtract these from the total allowable debt to find out what can be allocated for housing expenses: Housing expenses = Total allowable debt - Monthly debt obligations Housing expenses = $1,640 - $600 = $1,040. Thus, the borrower can afford $1,040 for housing expenses without exceeding the FHA's recommended DTI ratio. This aligns with the calculation that supports the choice in the answer provided.