Which source is used to determine monthly living expenses for ATR analysis?

• A. Based on the borrower's income
• B. Based on property taxes
• C. Based on documented living expenses or standard consumer expense data
• D. Based on credit score

Answer: (C)

In ATR analysis, assessing the borrower's ability to repay hinges on estimating monthly living expenses, which are separate from debts and housing costs. The living expenses are taken from either actual, documented spending by the borrower or from standard consumer expense data used industry-wide. This method keeps the affordability assessment grounded in real budgets or widely accepted benchmarks, rather than depending on income alone or other factors like credit score. Property taxes influence housing costs, not the general living expenses, and credit score isn’t used to determine living expenses either. So the best source is documented living expenses or standard consumer expense data.