Illinois real estate exam math
Buyer qualification ratios
A buyer can fit the housing ratio and still exceed the total-debt ratio. Work both sides before choosing a maximum payment. Put every figure on a monthly basis, separate the home payment from other counted debts, and use the income and limits the exercise actually gives you.
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The short answer
The housing ratio is proposed monthly housing expense divided by gross monthly qualifying income, multiplied by 100. Total DTI adds other counted monthly debts to housing before dividing by the same income. Under two stated limits, calculate income times the housing limit and income times the total-debt limit minus other debts; the smaller housing amount controls. These are ratio calculations, not a loan approval. Use the supplied percentages and debt rules rather than treating one remembered cutoff as law for every mortgage.
PSI’s booklet effective June 24, 2026 lists debt ratios within National IV.A.2, General underwriting process. Financing represents 10% of the 100 scored national broker questions as a whole, not ten qualification-ratio questions. These original exercises are not official or recalled PSI items or a validated readiness test.
Solve the ratio before judging the result
- Identify the unknown. Are you finding a housing ratio, total DTI, monthly income, maximum housing payment, principal-and-interest allowance or a simplified residual amount? Write its units first: dollars per month or a percentage.
- Normalize qualifying income. Annual income is divided by twelve. For stated eligible fixed pay, twice-monthly pay is multiplied by two; biweekly pay is multiplied by twenty-six and divided by twelve. Weekly pay uses fifty-two divided by twelve. One unusually large variable paycheck is not automatically approved qualifying income.
- Build the complete monthly housing amount defined by the exercise. Convert annual taxes and insurance before adding them. Include stated mortgage insurance, association dues, ground rent, assessments or simultaneous-loan payments when required. Do not use only principal and interest, and do not count a component again if the supplied housing total already includes it.
- Separate the other counted monthly debts. Use the supplied monthly payments and inclusion rules, not the outstanding car-loan or card balance. Deferred loans, student loans, leases, short remaining terms, support payments and debts paid by others have program-specific treatment. A blank or zero reported payment is not a universal exclusion.
- Calculate both ratios. Housing ratio = housing / income x 100. Total DTI = (housing + other counted debts) / income x 100. With the same positive income and nonnegative other debts, total DTI cannot be lower than the housing ratio.
- For two stated limits, calculate both housing ceilings independently. Front ceiling = income x housing-limit decimal. Back ceiling = income x total-debt-limit decimal minus other counted debts. Use the smaller. If the total-debt calculation leaves no positive housing capacity, do not present a negative result as an approved mortgage payment.
- For missing income, reverse the division. Housing / housing-limit decimal gives one minimum; total monthly obligations / total-debt-limit decimal gives another. When both limits must be met, the larger income requirement controls. This is the opposite selection from choosing the smaller housing ceiling.
- Keep precision until the requested result. Convert a percentage to a decimal for multiplication, and multiply a quotient by one hundred when reporting a percentage. Follow the exercise’s stated rounding and comparison rule. A rounded display alone should not be mistaken for proof that an exact ceiling was met.
- Keep the boundary clear. Regulation Z’s general ability-to-repay framework considers DTI or residual income without one prescribed DTI cutoff for every covered loan. Agency, product and lender standards still matter. Income verification, credit, property and other requirements remain; a ratio is not approval or a household budget.
| Find | Formula | Check |
|---|---|---|
| Monthly qualifying income | Annual qualifying income / 12 | Use the stated eligible income |
| Housing ratio | Housing / monthly income x 100 | Report a percentage |
| Total DTI | (Housing + other counted debts) / monthly income x 100 | Count housing and each other debt once |
| Front housing ceiling | Monthly income x housing-limit decimal | This limits housing directly |
| Back housing ceiling | Monthly income x total-debt-limit decimal - other debts | Subtract only nonhousing counted debt |
| Maximum housing under both | Smaller of the two housing ceilings | A nonpositive back result leaves no positive housing capacity |
| Minimum income under both | Larger of housing/front decimal and total debt/back decimal | Reverse division, then compare |
| P&I allowance | Permitted total housing - other included housing charges | The housing cap is not automatically P&I |
| Simplified residual amount | Stated monthly income - stated total monthly obligations | Dollars; not a full VA calculation |
| Biweekly fixed pay to monthly | Paycheck x 26 / 12 | Biweekly is not twice monthly |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| Gross pay and take-home pay | Gross pay precedes taxes and payroll deductions. Qualifying income must also meet the applicable inclusion and verification rules. | Use gross qualifying income when that is what the exercise supplies. |
| Housing ratio and total DTI | Housing ratio uses the defined housing obligation. Total DTI adds other counted monthly debts. | Total DTI must include proposed housing. |
| Debt balance and monthly obligation | An outstanding balance is not usually the monthly numerator item. A program can supply a formula to derive a payment when necessary. | A $22,000 balance and $475 payment have different jobs. |
| PITI and full qualifying housing | Principal, interest, taxes and insurance are a core set. Applicable mortgage insurance, dues, assessments and other required housing charges can enlarge the total. | Use the complete supplied housing figure without double counting. |
| Biweekly and semimonthly | Biweekly means every two weeks, ordinarily twenty-six pay periods in this annualization. Semimonthly means twice per month, twenty-four periods. | Two paychecks per month is not the biweekly conversion. |
| Maximum housing and minimum income | Choose the smaller housing ceiling when limiting payment. Choose the larger income requirement when both ratios must be met. | Check what is being solved before choosing smaller or larger. |
| DTI and simplified residual | DTI reports a fraction of income as a percentage. The simplified residual exercise reports the remaining dollars. | Neither result is a complete personal budget. |
| Simplified residual and VA residual | The simple subtraction here is not a completed VA loan analysis. VA uses its separate actual-income, deduction, shelter and household framework. | Do not carry a gross-income remainder straight into a VA residual table. |
| Program rule and universal law | A program’s limits, conditions and exceptions apply within that program. They do not establish a single federal ceiling for every mortgage. | A supplied 28/36 pair is a classroom assumption, not every lender’s current offer. |
| Income source and reliability | Protected sources cannot be automatically discounted on a prohibited basis. Amount, probable continuance and actual circumstances can be evaluated lawfully. | Neutral wording alone does not make a discriminatory criterion lawful. |
Work through the facts
Calculate both qualification ratios
A buyer has $96,000 in annual qualifying income. Proposed housing expense is $2,400 per month, and other counted debts total $900 per month. Find both ratios. All amounts are stipulated qualifying figures; no approval is implied.
- Gross monthly income is $96,000 / 12 = $8,000.
- Housing ratio is $2,400 / $8,000 = 30%.
- Total DTI is ($2,400 + $900) / $8,000 = 41.25%.
Answer: Housing ratio is 30% and total DTI is 41.25%.
Build housing expense before dividing
Monthly principal and interest are $1,850. Annual taxes are $7,200, annual homeowners insurance is $1,440, mortgage insurance is $125 monthly, and association dues are $185 monthly. Gross monthly income is $9,200. The exercise expressly includes each listed housing component and asks for the final percentage to two decimal places.
- Monthly taxes are $600 and monthly homeowners insurance is $120.
- Housing expense is $1,850 + $600 + $120 + $125 + $185 = $2,880.
- $2,880 / $9,200 = 0.313043..., or about 31.30%.
Answer: The housing-expense ratio is about 31.30%.
Find the binding ratio ceiling
A problem gives $9,000 gross monthly income, a 28% housing ratio, a 36% total ratio, and $650 in other counted monthly debts. What housing payment do the stated ratios permit?
- Housing-ratio ceiling is $9,000 x 0.28 = $2,520.
- Total debt ceiling is $9,000 x 0.36 = $3,240; subtract $650 to leave $2,590 for housing.
- The smaller result is $2,520, so the housing ratio binds.
Answer: The ratio-based maximum housing payment is $2,520.
Recover required gross income
Total monthly obligations are $3,600 and the problem requires total DTI not to exceed 40%. What gross monthly income supports that amount at exactly 40%?
- Convert 40% to 0.40.
- $3,600 / 0.40 = $9,000.
- Check: $3,600 / $9,000 = 40%.
Answer: Required gross monthly income is $9,000, or $108,000 annually.
Use monthly payments instead of balances
A buyer has a $22,000 auto balance with a $475 monthly payment, a $9,000 card balance with a $180 stated monthly payment, a $225 student-loan payment, and $2,300 proposed housing expense. Gross monthly income is $8,000.
- Counted monthly obligations are $475 + $180 + $225 + $2,300 = $3,180.
- Do not add the $22,000 and $9,000 balances to a monthly numerator.
- $3,180 / $8,000 = 0.3975, or 39.75%.
Answer: The total DTI is 39.75% under the stated debt treatment.
Compare DTI and residual income
A borrower has $7,500 in monthly qualifying income and $3,000 in total monthly debt obligations. Find DTI and the simplified Regulation Z residual amount. Treat the income and obligations as the supplied definition for this simplified exercise; this is not a completed VA residual-income calculation or a take-home spending budget.
- DTI is $3,000 / $7,500 = 0.40, or 40%.
- Residual income is $7,500 - $3,000 = $4,500.
- One result is a percentage and the other is a dollar amount.
Answer: DTI is 40% and monthly residual income is $4,500.
When the total-debt ratio binds
The exercise gives $8,000 monthly qualifying income, a 28% housing ceiling, a 36% total-debt ceiling and $900 in other counted monthly debts.
- The front ceiling is 8,000 x 0.28 = $2,240.
- The back ceiling is 8,000 x 0.36 - 900 = $1,980. Choose the smaller housing amount.
Answer: The ratio-based housing maximum is $1,980; the total-debt ratio binds.
Biweekly is not twice monthly
An exercise supplies eligible fixed gross pay of $2,400 every two weeks and directs the usual twenty-six-pay-period annualization. Compare it with $2,400 paid twice monthly.
- Biweekly: 2,400 x 26 / 12 = $5,200 monthly.
- Twice monthly: 2,400 x 2 = $4,800 monthly. These are different supplied pay frequencies.
Answer: The biweekly monthly equivalent is $5,200, which is $400 more than the twice-monthly amount.
Minimum income with a cents-only entry
A classroom exercise supplies $3,600 total monthly obligations and an exact 43% ceiling. It requires the unrounded ratio to meet the ceiling and allows monthly income entries only in cents.
- 3,600 / 0.43 = 8,372.093023... . A nearest-cent entry of $8,372.09 is slightly too small for the stipulated exact comparison.
- The next cent, $8,372.10, meets the supplied constraint. This upward rounding applies to this exercise’s minimum-income entry, not every program’s underwriting policy.
Answer: The minimum permitted entry under the supplied rules is $8,372.10 monthly.
A changed payment changes DTI
Qualifying income stays at $8,000. Counted monthly obligations rise from $3,000 to $3,400 before closing. The exercise asks for the mathematical change, not a credit decision.
- 3,000 / 8,000 x 100 = 37.5%. After the change, 3,400 / 8,000 x 100 = 42.5%.
- 42.5 minus 37.5 equals five percentage points. Apply the actual program’s recalculation and re-underwriting criteria separately; do not assume a previous decision survives every change.
Answer: DTI rises by five percentage points, from 37.5% to 42.5%.
Mistakes to avoid
- Use annual income under a monthly payment. Convert all figures to a consistent period first.
- Use the bank deposit instead of stipulated gross pay. The deposit can reflect deductions; use the stated qualifying income definition.
- Use a balance as the monthly debt payment. Use the qualifying payment supplied or derived under the supplied rule.
- Leave housing out of total DTI. Total DTI includes the proposed housing obligation.
- Add taxes and dues again to an all-inclusive housing total. Count each included component once.
- Choose the larger allowable housing figure. Both ceilings must be met, so the smaller housing amount controls.
- Choose the smaller required income. Both ratios must be met, so the larger minimum income controls.
- Multiply every two-week paycheck by two. For the stated fixed-pay annualization, multiply by twenty-six and divide by twelve.
- Exclude every deferred or zero-reported debt. The applicable program can require another qualifying payment or documentation.
- Treat all support payments the same in every program. Follow the specified debt or income-adjustment method and avoid double counting.
- Call an income-minus-debt exercise full VA residual income. VA’s separate analysis includes deductions, shelter and household considerations.
- Use 43% as universal current General QM law. The General QM rule replaced its former numerical DTI ceiling; current requirements and other programs still apply.
- Turn a rounded number into an approval. Compare using the exercise’s actual precision rule, then apply all remaining requirements.
- Discard part-time or retirement income automatically. Regulation B requires lawful evaluation of protected income and actual circumstances.
24 questions on income, housing and debt
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. A borrower has $8,000 gross monthly income and $2,400 proposed housing expense. What is the housing ratio?
- 30%
- 24%
- 70%
- 33.33%
Show answer and explanation
Answer: A. 30%
$2,400 / $8,000 = 0.30, or 30%.
2. Housing expense is $2,200, other counted debts are $800, and gross monthly income is $7,500. What is total DTI?
- 10.67%
- 40%
- 29.33%
- 44%
Show answer and explanation
Answer: B. 40%
Total obligations are $3,000, and $3,000 / $7,500 = 40%.
3. A borrower earns $108,000 annually. What is gross monthly income before adding other qualifying sources?
- $9,000
- $2,076.92
- $12,000
- $8,100
Show answer and explanation
Answer: A. $9,000
$108,000 / 12 = $9,000.
4. Gross monthly income is $10,000, the stated total ratio is 40%, and other counted debts are $900. What housing amount remains under that ratio?
- $4,000
- $3,100
- $4,900
- $3,600
Show answer and explanation
Answer: B. $3,100
$10,000 x 0.40 = $4,000 total obligations; $4,000 - $900 = $3,100.
5. Which statement about mortgage DTI limits is accurate?
- DTI uses net take-home income
- Different products and creditors can use different limits
- Federal law sets one ratio for every loan
- A passing ratio guarantees approval
Show answer and explanation
Answer: B. Different products and creditors can use different limits
Current ability-to-repay rules require consideration of repayment ability but do not impose one DTI threshold on every covered mortgage.
6. The exercise gives $8,000 monthly qualifying income, 28% housing and 36% total-debt ceilings, and $900 other monthly debts. What is maximum housing under both?
- $2,880
- $2,240
- $1,980
- $3,780
Show answer and explanation
Answer: C. $1,980
The front ceiling is $2,240. The back ceiling is $2,880 minus $900, or $1,980. The smaller amount satisfies both supplied ratio limits; it is not an actual credit decision.
7. An exercise supplies eligible fixed gross pay of $2,400 every two weeks, using twenty-six pay periods annually. What is the monthly equivalent?
- $62,400
- $4,800
- $2,400
- $5,200
Show answer and explanation
Answer: D. $5,200
2,400 times 26 is $62,400 annually. Divide by twelve to obtain $5,200 monthly. This assumes the fixed qualifying pay supplied, not a single unusually large variable paycheck.
8. The same $2,400 eligible gross pay is instead paid twice per month. What is monthly income?
- $2,400
- $4,800
- $62,400
- $5,200
Show answer and explanation
Answer: B. $4,800
Two times $2,400 equals $4,800 monthly. Twice monthly and every two weeks use different pay frequencies.
9. Annual property tax is $7,200 and annual homeowners insurance is $1,440. What combined monthly amount is used in the supplied exercise?
- $600
- $8,640
- $120
- $720
Show answer and explanation
Answer: D. $720
7,200 divided by twelve is $600; 1,440 divided by twelve is $120. Add the monthly amounts to get $720, then include the other stated housing components.
10. Housing is stipulated to include P&I, taxes, insurance, mortgage insurance and dues. Should the included dues be added a second time?
- Only if the borrower has gross income
- No; each included component is counted once
- Yes, because dues are not principal
- Yes, for every total DTI
Show answer and explanation
Answer: B. No; each included component is counted once
A complete housing figure already contains its specified components. Double counting would overstate both housing and total debt.
11. A $22,000 auto balance has a stated qualifying payment of $475 monthly. Which figure belongs in this exercise’s monthly DTI numerator?
- $22,475
- $0 automatically
- $475
- $22,000
Show answer and explanation
Answer: C. $475
Use the supplied qualifying monthly payment. Do not replace it with the account balance or assume a payoff or exclusion not stated.
12. The exercise defines simplified residual as $7,500 monthly income minus $3,000 total monthly obligations. What is the result?
- $10,500
- $3,000
- 40%
- $4,500
Show answer and explanation
Answer: D. $4,500
7,500 minus 3,000 equals $4,500. It is a dollar remainder under the supplied definition, not a complete VA calculation or personal affordability budget.
13. Under the same positive income denominator and nonnegative other debts, how does total DTI compare with the housing ratio?
- It must always be lower
- It is at least as high
- It cannot be calculated
- It ignores housing
Show answer and explanation
Answer: B. It is at least as high
Total DTI adds nonhousing counted debts to housing. It equals the housing ratio only when those other counted debts are zero; adding nonnegative debt cannot lower the ratio.
14. A supplied housing ceiling is $2,500, and included non-P&I housing charges are $800. What P&I amount remains?
- $2,500
- $3,300
- $800
- $1,700
Show answer and explanation
Answer: D. $1,700
Subtract the included non-P&I charges once: $2,500 minus $800 equals $1,700. A cap on total housing is not automatically a cap on principal and interest alone.
15. Monthly obligations are $3,600 and the supplied total-debt limit is 40%. What monthly income reaches that ratio exactly?
- $1,440
- $3,600
- $9,000
- $90,000
Show answer and explanation
Answer: C. $9,000
Divide $3,600 by 0.40 to get $9,000. Check by dividing $3,600 by $9,000; the result is 40%.
16. An exercise requires both a 30% housing ratio and a 40% total-debt ratio. Housing is $2,400 and other counted debt is $1,200. Which minimum monthly income satisfies both?
- $9,000
- $6,000
- $3,600
- $8,000
Show answer and explanation
Answer: A. $9,000
The housing path needs $2,400 / 0.30 = $8,000. Total debt is $3,600, which needs $3,600 / 0.40 = $9,000. Choose the larger required income.
17. With $10,000 income and a supplied 40% total-debt limit, other counted debts already total $4,400. What follows for positive housing capacity under that limit?
- $8,400 of housing remains
- $4,000 of housing remains
- A negative $400 mortgage is approved
- None is available under the supplied figures
Show answer and explanation
Answer: D. None is available under the supplied figures
The debt ceiling is $4,000. Other counted debts exceed it by $400 before adding housing. The arithmetic does not authorize a negative housing payment or determine the outcome under every possible loan program.
18. May part-time or retirement income be automatically excluded merely because it comes from that protected source?
- Yes, whenever a borrower prefers gross pay
- No; evaluate it under lawful standards and actual circumstances
- Yes, in every application
- Yes, if the label sounds neutral
Show answer and explanation
Answer: B. No; evaluate it under lawful standards and actual circumstances
Regulation B bars automatic discounting or exclusion on a prohibited basis or because income is part-time or an annuity, pension or retirement benefit. Amount and probable continuance can still be evaluated lawfully.
19. Is the old 43% General QM threshold a single current federal approval ceiling for every mortgage?
- Yes, without exception
- Yes, and all other underwriting ends
- Yes, for all types of residual income
- No; the General QM definition changed, and programs and other requirements differ
Show answer and explanation
Answer: D. No; the General QM definition changed, and programs and other requirements differ
The General QM rule replaced its former 43% DTI ceiling with price-based thresholds and other requirements. The general repayment-ability framework does not prescribe one DTI threshold for every covered loan.
20. A credit report shows a student loan with a zero monthly payment. What is the safest general conclusion?
- The applicable program and documentation determine its qualifying treatment
- Every loan program must ignore it
- Every loan program must use the full balance
- No documentation can matter
Show answer and explanation
Answer: A. The applicable program and documentation determine its qualifying treatment
A reported zero, deferment or forbearance does not create one universal exclusion. Use the exercise’s payment or stated program rule; do not invent an exclusion or a percentage for every loan.
21. A classroom exercise requires $3,600 debt / monthly income to be no more than 43%, compares the unrounded ratio and permits income entries only in cents. What is the minimum permitted income entry?
- $8,372.10
- $8,372.00
- $8,372.09
- $3,600.43
Show answer and explanation
Answer: A. $8,372.10
3,600 / 0.43 = 8,372.093023... . Because this exercise requires an unrounded ceiling and cents-only entries, round the required income upward to $8,372.10. Rounding to $8,372.09 leaves the ratio slightly above 43%. This is the supplied classroom rule, not a claim about every loan program’s rounding policy.
22. An exercise compares unrounded DTI with an exact 40% ceiling. Debt is $3,600.40 and income is $9,000. A two-decimal display reads 40.00%. Does the display prove the ceiling was met?
- Yes; all underlying numbers must be ignored
- Yes; the borrower is fully approved
- Yes; every rounded display controls
- No; the unrounded ratio is above 40%
Show answer and explanation
Answer: D. No; the unrounded ratio is above 40%
3,600.40 / 9,000 x 100 = 40.004444...%. The displayed 40.00% hides the excess. The exercise expressly requires the unrounded comparison; actual program rules must be checked separately.
23. Counted monthly obligations increase from $3,000 to $3,400 while qualifying income remains $8,000. How much does DTI increase?
- Forty-two and a half percentage points
- Five percent of the original ratio
- Five percentage points
- No change
Show answer and explanation
Answer: C. Five percentage points
DTI rises from 37.5% to 42.5%, a difference of five percentage points. A five-point difference is not the same as a 5% relative increase. Updated debt can also require review under the applicable program’s criteria.
24. A question gives only a simplified gross-income-minus-debt remainder. Can that result alone establish that a VA residual-income requirement is satisfied?
- Yes; every program uses identical deductions
- Yes; residual income always uses grossed-up income
- No; the separate VA income, deduction, shelter and household framework must be applied
- Yes; family size and region never matter
Show answer and explanation
Answer: C. No; the separate VA income, deduction, shelter and household framework must be applied
The VA framework is more specific than this classroom subtraction. It uses actual income for residual analysis and the applicable deductions, obligations, shelter and household context. This lesson does not approve a VA loan or table exception.
Common questions
What are the housing-ratio and DTI formulas?
Housing ratio = monthly housing expense / gross monthly qualifying income x 100. Total DTI = (monthly housing expense + other counted monthly debts) / the same qualifying income x 100. Housing is included in total DTI.
With $8,000 income, $2,400 housing and $900 other debt, the ratios are 30% and 41.25%. Those figures describe the supplied obligations; they do not by themselves establish approval.
How do I find a maximum housing payment using two ratios?
Multiply income by the stated housing-limit decimal. Separately multiply income by the total-debt-limit decimal, then subtract other counted nonhousing debts. Choose the smaller housing amount because both ceilings must be met.
With $8,000 income, 28/36 limits and $900 other debt, the ceilings are $2,240 and $1,980. The result is $1,980 before other underwriting requirements. The supplied 28/36 pair is a teaching assumption, not every lender’s current standard.
Why do I sometimes choose the larger result instead?
Choose the larger result when finding minimum income under two required ratios. Divide housing by the housing-limit decimal, and divide total obligations by the total-debt-limit decimal. Income must be sufficient for both.
With $2,400 housing, $1,200 other debt and supplied 30/40 limits, the income requirements are $8,000 and $9,000. The larger $9,000 monthly amount controls. For maximum housing, the smaller ceiling controls instead.
Should I use gross income or take-home pay?
For these standard ratio exercises, use the supplied gross monthly qualifying income. Gross pay is before payroll taxes and deductions. A bank deposit is not automatically the correct denominator.
Actual qualifying income still requires the applicable source, documentation, stability and continuance analysis. Do not automatically count every deposit, one high variable paycheck or every expected future payment. No income eligibility is approved by this lesson.
How do annual, weekly and biweekly pay become monthly income?
For stipulated eligible fixed pay, divide annual income by twelve. Multiply weekly pay by fifty-two and divide by twelve. Multiply biweekly pay by twenty-six and divide by twelve. Twice-monthly pay is multiplied by two.
Fannie Mae’s fixed-base-pay table uses those conversions. Variable hours or changing pay require their own documented calculation and trend analysis. The formulas here do not turn a single variable paycheck into approved qualifying income.
What belongs in qualifying housing expense?
Use the complete housing amount defined by the problem or program. It can include principal, interest, applicable property, flood and mortgage insurance, property taxes, ground rent, special assessments, association dues and qualifying subordinate financing.
A supplied all-inclusive figure should not have its taxes or dues added again. Fannie Mae distinguishes association common-area utility charges from individual-unit utility charges. Escrow arrangements do not mean ongoing property obligations disappear.
Which debts belong in total DTI?
Use the stated qualifying monthly obligations and inclusion rules. These can include installment, revolving, lease, student, support and simultaneous-loan payments. The outstanding balance generally serves a different purpose from the monthly payment.
Duration, payoff, documentation, deferral, debts paid by others and program exceptions can change treatment. Do not treat every debt with a short remaining term or a reported zero payment as automatically excluded.
Do student loans always count at the reported payment?
Not necessarily. Program and documentation rules matter. Current Fannie Mae guidance provides specific treatment when a reported student-loan payment is absent, incorrect or zero; a documented income-driven zero payment differs from a deferred or forborne loan.
For an exam calculation, use the qualifying payment or rule supplied. Avoid importing an unstated percentage or promising that every student loan with a reported zero is ignored.
Are car leases and short installment debts treated the same?
No. Fannie Mae requires lease payments to be considered regardless of remaining months, while installment treatment includes its term and significant-payment rules. Other programs can use different criteria.
If a question supplies a qualifying payment or inclusion rule, follow it. A short remaining term is not enough to justify ignoring every large obligation, and a lease should not automatically be given an installment-loan exclusion.
How do alimony and support payments affect the math?
Follow the specified program and method. An obligation may be counted as a monthly debt; a permitted income-reduction method can have different treatment. Do not subtract the same payment from income and add it as debt again.
Current Fannie Mae’s monthly-obligation topic is dated August 5, 2026 and includes distinct treatment for named support and equalization obligations. Do not rely on an older shorthand as a complete rule for every type of support or every lender.
What is residual income in this lesson?
The simplified exercise uses the stated monthly income minus the stated total monthly obligations. With $7,500 income and $3,000 obligations, the remainder is $4,500. DTI is 40%, so the two answers use different units.
Regulation Z defines the relevant income and debt components for its residual-income consideration. This simple subtraction is not a full VA loan analysis or a complete budget including every household living cost.
Why is VA residual income different?
VA’s framework uses actual income and deductions, debts, shelter expenses and a family-support analysis. Its guidance varies by loan size, family size and region. The simple gross-income remainder in a classroom DTI problem should not be dropped straight into that analysis.
The separate VA framework also treats DTI as a guide rather than an automatic approval result. This page does not validate a VA loan, calculate the household’s required table amount or approve a compensating-factor exception.
Does current federal law require one maximum DTI?
No. The general ability-to-repay framework in Regulation Z does not prescribe one monthly DTI threshold for every covered transaction. Current General QM requirements also differ from the former numerical 43% ceiling.
Programs, products and creditors have their own applicable standards and conditions. A passing exercise ratio is not a promise of approval, affordability, a rate or a particular loan amount.
Can part-time or retirement income be discounted automatically?
Regulation B prohibits discounting or excluding income because of a prohibited basis or because it is part-time earnings or an annuity, pension or other retirement benefit. A creditor may evaluate amount and probable continuance under lawful standards.
Evaluate actual circumstances rather than a stereotype about a protected group or source. Applying a criterion consistently does not by itself make an otherwise discriminatory rule lawful, and this does not require counting unsupported income automatically.
How much precision should I keep?
Retain the full calculation until the result requested. For a percentage, divide first and then multiply by one hundred. Round the displayed result as instructed, and use the question’s stated rule when comparing it with a ceiling.
A rounded display is not proof that the unrounded value meets an exact limit. Actual loan programs can have their own calculation, rounding and documentation requirements. The exercises here are not a substitute for them.
How should I review a missed qualification problem?
Mark the unknown and its units, normalize income and annual housing charges, list each counted payment once, and compare both paths. Check whether you selected the smaller housing ceiling or the larger required income. Then explain why each wrong answer fails.
If short phone practice helps, downloading Pass Illinois is optional. Property Ownership practice is free; full access is paid. The app provides exam preparation, not approved pre-license education, and the web guide remains available.
What if existing debts leave no positive housing capacity?
Calculate the stated total-debt ceiling before subtracting other counted debts. With $10,000 income, a 40% limit and $4,400 other debt, the total ceiling is $4,000 and the back calculation is negative $400.
That means the supplied figures leave no positive housing capacity under that limit. It does not mean a negative mortgage payment is approved, and it is not a decision under every possible product or changed set of facts.
How do I find principal and interest after a housing cap?
Subtract the included non-P&I housing components from the permitted total housing amount. A $2,500 total housing ceiling with $800 in included taxes, insurance and other non-P&I charges leaves $1,700 for principal and interest.
This is a payment allowance. It does not identify the loan principal without the necessary rate, term and payment-method information, and it does not remove the other underwriting requirements.
Are percentage points the same as a percentage change?
No. Moving from 37.5% to 42.5% is an increase of five percentage points. A relative percentage change divides that five-point difference by the starting 37.5%, so it answers a different question.
Use the wording asked for. A changed payment or income amount can alter DTI and may require review under the actual program’s criteria; the arithmetic alone does not decide every re-underwriting requirement.
Must received support income always be disclosed?
Regulation B provides that an applicant need not reveal alimony, child support or separate maintenance income if the applicant does not want it considered in deciding creditworthiness. When that income is relied on, its likely consistent receipt and applicable underwriting treatment matter.
Do not confuse optional disclosure of received support income with concealing a support obligation the borrower is required to pay. This distinction does not authorize omitting debts or giving an incomplete loan application.
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Put real estate math into practice
Set up the calculation, keep the units consistent, and check the worked answer.
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Official sources and scope
Reviewed for October 2026 using the public PSI outline, identified current CFPB provisions and guidance, Fannie Mae topic editions and VA’s separate framework. Source evidence records the actual passages read and any identified prior reading reused. Supplied dollar amounts and ratio limits are original exercises, not market quotes, loan approvals or one universal underwriting policy.
- PSI June 24, 2026: debt ratios in underwriting
- CFPB General QM final-rule explanation
- Regulation B information requests
- CFPB: debt-to-income ratio definition
- CFPB Regulation Z 1026.43: general repayment determination and coverage
- Fannie Mae B3-6-02: debt ratios and re-underwriting
- Fannie Mae B3-6-03: qualifying monthly housing expense
- Fannie Mae B3-3.1-01: current income stability and continuance
- Fannie Mae B3-3.3-01: fixed and variable base-pay calculations
- Fannie Mae B3-6-05: current monthly debt obligations
- Regulation B 1002.6: lawful treatment of income
- VA Chapter 4: separate residual-income and DTI framework
- CFPB: Qualified Mortgage overview
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.