Section 7: Borrower Analysis: Assets Flashcards
Housing Ratio (Front End Ratio)
HR= (Monthly Housing expenses / Monthly Gross Income) / 100
Total Debt Income Ratio (Back end Ratio)
DTI=(Total Monthly Debt Obligations / Monthly Gross Income) * 100
Maximum Housing Payment to meet housing ratio
monthly gross income * lenders maximum housing ratio
Maximum Housing Payment to meet Total DTI Ratio
(Monthly gross income * Maximum Total DTI Ratio) - Other Debt
Gross Income 5200
600 monthly debt
Housing DTI is 28%
Total DTI is 36%
What is maximum Housing payment he can afford
5200 * 28% = 1456
(5200 * 36%) - 600 = 1272
Because TJ must be qualified by using both ratios and the $1272 is lessor of two, His maximum housing payment is $1272.
Conventional Loan Qualifying Ratio
Housing Ration 28%
Total Debt Ration 36%
Fannie Mae Conforming Loans
Total DTI 36-45%
Housing Ratio 28%
Freddie Mac Conforming Loans
Housing Ratio: N/A
Total Debt Ratio: upto 45%
FHA Loans
Housing Ration: 31%
Total Debt Ratio: 43%
VA
Housing Ration N/A
Total Debt Ratio: 41%
Loan to Value Ratio
Lenders use LTV to determine loanable amount
LTV = (Loan Amount / Purchase price or Appraised Value) * 100
The 3 Cs of Assessing the ability to Repay
Character - Likelihood of borrowers to replay the loan, based primarily on their credit history
Capital - Current assets, such as real estate, personal property, savings and investments
Capacity: Ability to handle the debt load, based on current income, current debts and other expense
Another C related to the property is Collateral.