Question

some rule-of-thumb ratios are helpful in understanding how a client's debt will be assessed by lenders, which can determine interest rates. which of these is not correct regarding ratio descriptions and the related benchmark? a) total monthly payment on all debts should be no more than 36% of gross monthly income. b) monthly housing costs include principal, interest, taxes, fees, and insurance, and should be no more than 28% of the prospective borrower's net income. c) the minimum required payments should be used in the calculation. d) consumer debt is all nonmortgage debt. it should be no more than 20% of monthly net income.

Answer 1

The correct answer is d) consumer debt is all nonmortgage debt. The other options listed in the question are correct.

Step-by-step explanation:

The correct answer is d) consumer debt is all nonmortgage debt. According to the question, this option is not correct regarding ratio descriptions and the related benchmark. The other options listed in the question are correct:

a) The total monthly payment on all debts should be no more than 36% of gross monthly income.

b) Monthly housing costs, including principal, interest, taxes, fees, and insurance, should be no more than 28% of the prospective borrower's net income.

c) The minimum required payments should be used in the calculation.

These ratios are commonly used by lenders to assess a client's debt and determine interest rates. By sticking to these guidelines, borrowers can improve their chances of getting approved for loans and secure more favorable interest rates.