Loan Officer Practice Exam 2026 – Comprehensive All-in-One Guide for Exam Success!

To determine the maximum monthly payment that Jim and Jan qualify for with a conforming loan based on their income and debts, we use the acceptable ratios of 28% for housing-related expenses (known as the front-end ratio) and 36% for total monthly debt obligations (known as the back-end ratio).

First, let's assess the 28% ratio. This means that Jim and Jan should not spend more than 28% of their gross monthly income on housing expenses, including principal, interest, taxes, and insurance. If their combined gross monthly income is known, we calculate 28% of that amount to establish the maximum housing payment allowed.

Next, we apply the 36% ratio, which includes both housing expenses and any other debts they might have, such as credit card payments or car loans. Just like before, we would calculate 36% of their gross monthly income and then subtract their other monthly debt payments from this total to find out how much of their income can be allocated towards housing expenses.

The maximum monthly payment that Jim and Jan qualify for is determined by the lower of the two calculations derived from the front-end and back-end ratios.

In this case, the given answer of $2,296 indicates that, based on Jim