A borrower earning $4,000 a month pays $600 in debt obligations. Based on an FHA debt ratio of 41%, how much can they afford for housing expenses?

To determine how much a borrower can afford for housing expenses based on an FHA debt ratio of 41%, it's important to understand how the debt ratio, also known as the debt-to-income (DTI) ratio, is calculated and applied.

First, let's calculate the maximum allowable debt for the borrower. The borrower has a gross monthly income of $4,000. To find the maximum allowable debt based on the FHA guidelines, we multiply the income by the debt ratio of 41%:

$4,000 (monthly income) x 0.41 (FHA debt ratio) = $1,640.

This amount represents the total monthly debt obligations the borrower can afford, including housing expenses and other debts.

Next, since the borrower already has $600 in monthly debt obligations, we subtract this from the total allowable debts to find out how much can be allocated for housing expenses:

$1,640 (maximum allowable debt) - $600 (existing debt) = $1,040.

This calculation shows that the borrower can afford $1,040 per month for housing expenses. This amount considers both the FHA guidelines and the borrower's current financial obligations, ensuring they do not exceed the recommended debt limits. Therefore, the correct answer is $1