Section 7: Borrower Analysis: Assets

Question 1

Housing Ratio (Front End Ratio)

Answer 1

HR= (Monthly Housing expenses / Monthly Gross Income) / 100

Question 2

Total Debt Income Ratio (Back end Ratio)

Answer 2

DTI=(Total Monthly Debt Obligations / Monthly Gross Income) * 100

Question 3

Maximum Housing Payment to meet housing ratio

Answer 3

monthly gross income * lenders maximum housing ratio

Question 4

Maximum Housing Payment to meet Total DTI Ratio

Answer 4

(Monthly gross income * Maximum Total DTI Ratio) - Other Debt

Question 5

Gross Income 5200
600 monthly debt
Housing DTI is 28%
Total DTI is 36%
What is maximum Housing payment he can afford

Answer 5

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.

Question 6

Conventional Loan Qualifying Ratio

Answer 6

Housing Ration 28%
Total Debt Ration 36%

Question 7

Fannie Mae Conforming Loans

Answer 7

Total DTI 36-45%
Housing Ratio 28%

Question 8

Freddie Mac Conforming Loans

Answer 8

Housing Ratio: N/A
Total Debt Ratio: upto 45%

Question 9

FHA Loans

Answer 9

Housing Ration: 31%
Total Debt Ratio: 43%

Question 10

VA

Answer 10

Housing Ration N/A
Total Debt Ratio: 41%

Question 11

Loan to Value Ratio

Answer 11

Lenders use LTV to determine loanable amount

LTV = (Loan Amount / Purchase price or Appraised Value) * 100

Question 12

The 3 Cs of Assessing the ability to Repay

Answer 12

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.