Question about this mortgage math problem

5 Replies

A borrower who is paid $14.50 per hour and works 30 hours per week, received __ per month?

A. $2320

B. $1885

C. $1740

D. $2500

So according to the instructor, the answer is B and the math they did to get $1885 is 14.50 x 30 x 52 / 12 = 1885

But the answer I got was $1740. I did 14.5 x 30 x 4 and it gave me 1740. So how am I wrong?

And where did that 52 come from ?

Originally posted by @Arty Fresh :

A borrower who is paid $14.50 per hour and works 30 hours per week, received __ per month?

A. $2320

B. $1885

C. $1740

D. $2500

So according to the instructor, the answer is B and the math they did to get $1885 is 14.50 x 30 x 52 / 12 = 1885

But the answer I got was $1740. I did 14.5 x 30 x 4 and it gave me 1740. So how am I wrong?

And where did that 52 come from ?

 The 52 represents how many weeks are in a year.

Don't feel bad, this is exactly why 80% of borrowers mis-state their income.

Your math implies that there are 4 weeks in a month.

If there were 4 weeks in a month, and 12 months in a year, that would imply 48 weeks a year.

But there are 52 weeks a year, because there are not EXACTLY 4 weeks (28 days) in any month, excluding February.

The instructor is correct, that's the exact math I did in 2 seconds when I read the question. 14.50/hr times 30 hours a week times 52 weeks divided by 12 months.

In practice, this is unlikely to be the actual number that an actual underwriter would use. It's rare to encounter someone who works consistently 30 hours a week. What we see "in the wild" is this week it's 34, next week it's 43, the following week it's 26. But for that first phone call when it's stated income since you don't have paperwork yet, sure, you use that to get an idea. 

The 52 is because there are 52 weeks in a year. Then you divide by 12 for months to get the answer. The average working month has 4.33 weeks in it, so you can get the same answer using your method by doing the following: 

$14.50 X 30 X 4.33 = $1883.55 or very close to the $1885.00 

However, we as lenders use the method that the instructor used. Its more accurate. $14.50 X 30 X 52 / 12 = $1885.00

I hope this helps?