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Flashcards in Scenario Deck (13):
1

Leo is looking to purchase his first home. He just graduated from college and has been at his first job for 1 years. He makes $60,000 a year and wants to purchase a newly built home near his family and friends. His credit is good and he has $10,000 to put down on his new home. He currently only has $500 in liabilities and is paying $700 in monthly rent. The home he’s found that he really wants to buy is $235,000. He intends to stay in this home for the foreseeable future.
1. What loan product would you suggest for this borrower?
2. What loan program would you suggest for this borrower?
Bonus Question: Does this borrower qualify for this property? Remember he has $10,000 down, the house in question is $235,000. He makes $60,000 a year and only has $500 in liabilities. (For reference, a $225,000 mortgage is roughly $1,010 @ 3.5 percent @ 30 years)

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2

Angela really needs to buy a new home. She’s being relocated with her company from California to Georgia. She currently owns a home in California that’s worth about $600,000. She’s looking for a comparable property in Georgia and has found one for about $370,000. (The cost of living is a lot of less expensive in Georgia). Her house is currently on the market in California but has not yet sold, she was hoping to use the $100,000 in equity that she has in her house in California to purchase her new home in Georgia but she does not really have time to wait to purchase her new property.
1. What advice would you give this borrower?

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3

Henry is looking for a new property to purchase in Colorado. He just returned from Afghanistan and is looking to put down some roots in his hometown where he is going to work for his brother. He does not have any money to put down on his new property but is anxious to become a homeowner.
1. What more information do you think you need to determine a possible mortgage solution for this borrower?
2. Can you think of a program that might work for this borrower?
3. Do all programs require a down payment?

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4

A borrower walks into your office looking to obtain a mortgage loan. They are in a desperate financial position and are thinking about cancelling their health insurance just to be able to afford to keep their house. This borrower remarks that they have just returned from Iraq and have no money for closing costs to refinance their property. Please provide at least 3 possible solutions for this borrower with your reasoning why it would be a suitable option for them. Also, provide at least 3 questions that you might ask this borrower in your initial interview to make sure that your options are suitable. If you can’t provide 3 options for this borrower, please explain why not and include any questions that you might ask this borrower to help you come up with suitable options for them.

1. A VA loan, they said they had just returned from Iraq so I would assume that they were in the military.
2. A 30-year fixed mortgage, to help lower the payment for the borrower to help with their financial burden
3. An ARM, depending on the interest rate and the payment with the ARM, this might give the borrower temporary relief till they get on their feet again and could refinance again before the ARM adjusts or until the borrower chooses to move again.
4. One of my questions to them would be if they are indeed active military or were in the military to determine whether they qualify for the VA loan. My second question would be how long they have lived in their home and how much time they have left on their current mortgage to determine whether stretching the mortgage out could alleviate the financial hardship. My third question would be if they intend to stay in this home, because if they intend to only stay in this house temporarily an ARM might help them short term

5

An elderly borrower walks into your office, she has just retired from her position as a school teacher and has lived in her home for 25 years. She is very close to paying it off and its value has skyrocketed over the last few years. She is burdened by her mortgage payment and feels like she doesn’t have enough money to comfortably live a retired life and have money to go visit her grandsons in another state. Please provide at least 3 possible solutions for this borrower with your reasoning why it would be a suitable option for them. Also, provide at least 3 questions that you might ask this borrower in your initial interview to make sure that your options are suitable If you can’t provide 3 options for this borrower, please explain why not and include any questions that you might ask this borrower to help you come up with suitable options for them.

1. A HECM or reverse mortgage would be the first option. She appears to be old enough and this would allow her some better cash flow because she could pay a smaller amount or not pay anything at all and she would be receiving cash from her equity to help her do the things she wants to do
2. A 30-year fixed rate mortgage would be a good second option. This would lower her payment way down and allow her to pay extra when she wants or save when she wants without tapping into her equity.
3. A 30-year fixed rate mortgage with cash out of the equity. This would allow her to take out some money in her equity and drop her payment without going into the reverse mortgage option. She could get enough money to put into her savings to help her when she needs it or to go see her grandsons.
4. My first question would be to verify that she is older than 62 years of age to make sure she even qualifies for the reverse mortgage. My second question would be if she has
someone who will want to inherit the house, this would be a good question to ask to see if she would even consider that reverse option. My last question would be if she is set on paying off her house soon because if she really wants to pay off her house none of the options would work well for her goal of paying off the house quickly.

6

A young couple walk into your office looking to purchase their first home. They are looking to invest in a starter home and think they’ll only be in that home for 5-7 years. They want to start a family and know that they will need a larger home later and don’t feel like they can buy that larger home now. They still want some freedom in their finances to travel and do the things they want to do but have also bounced around the idea that they might try to pay off this home and keep it as a rental property when they move onto their next house. They live in a college town and renting it would be something they could easily do. Please provide at least 3 possible solutions for these borrowers with your reasoning why it would be a suitable option for them. Also, provide at least 3 questions that you might ask this borrower in your initial interview to make sure that your options are suitable If you cannot provide three options for this borrower, please explain why not and include any questions that you might ask this borrower to help you come up with suitable options for them.

1. 30-year fixed rate mortgage would be the first option. It gives the borrower the lowest possible payment and the financial flexibility to do what they want, they could also then pay whatever they want monthly without being stuck with a higher payment, so they could still pay it off early if they wanted to.
2. 15-year fixed rate mortgage would be a good second option, this would allow them to pay it off quickly but would not allow them the same financial flexibility as a longer term but it would help them meet their goal of paying off the home and keeping it as a rental property.
3. The third option would be a 5/1 ARM or 7/1 ARM because they intend to be out of the house in 5-7 years they could ride out the ARM until it adjusts and then sell and move to their next home. This would not necessarily be the best option if they want to keep the property long term as an investment property but it would allow them possibly more financial freedom for them to do other things they want to do.
4. My first question would be which goal is most important, paying off the house to rent or having more financial freedom? My second question would be to verify that they are planning on moving within 5-7 years to make sure that the ARM option is viable for them. My third question would be if they have any other goals in mind? This will allow me to make sure I have all my bases covered with my three options.

7

Tyler and Erin are looking to purchase their first home. Tyler makes $23.50 an hour and works on average 40 hours per week. Erin makes $21.50 an hour and works 40 hours of regular time and 5 hours of overtime a week. How much income do each of them make? (Hint: to calculate income for overtime, you’ll need to do the hourly rate by .5 for time and a half)

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8

Kyle and Vivian are going to purchase their new home together. Kyle makes $55,000 a year and Vivian makes $26.50 an hour at 40 hours a week. What is their monthly income?

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9

Laura and Jim are looking to refinance their home. Laura makes $65,000 a year plus she works a second job (which she has been doing for 5 years) at $12.00 an hour for 10 hours a week. Jim is on Social Security and makes a nontaxable $1980 a month. What is their monthly income? (Hint: don’t forget to gross up the nontaxable income)

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10

Jack and Jill are looking to purchase their first home and we need to discover what their debt-to- income ratios are. Jack makes a gross income of $4,567 a month while Jill makes a gross monthly income of $3,200. Jack and Jill have a mortgage payment of $750 a month. They also have credit card payments of $50 and $25 a month, they have two car payment one for $111 (which will be paid off in 6 months) and $256. They also pay $120 for their cell phone and make a monthly contribution to their 401K of $1,200. What is their front end and back end DTI?

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11

Holly and James are looking to purchase their first home, they make a total of $5,600 a month in gross monthly income. Their proposed monthly payment is $670 for their new home, they also have a credit card with a monthly payment of $75, student loans of $230 a month and cell phone and utilities payments of $223 a month. What is their housing expense DTI?

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12

Ginger and Horace are looking to refinance their current home. Ginger makes $15.50 an hour at 40 hour a week and Horace makes $80,000 a year. Their monthly mortgage payment is $1,000 and their liabilities total $500 a month. What is their gross monthly income? What is their front end and back end DTI ratios?

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