What The $?!... NMLS Math Exam Study Guide!

Borrowers with gross monthly income of $5,700 applying for a loan with a PITI of $1,345.67 and a VISA account with a minimum monthly payment of $245.00 would have a debt-to-income ("bottom" or "back-end") qualifying ratio equal to:

Back-End Ratio: PITI + Debt / GMI $1,345.67 + $245.00 = $1,590.67 $1,590.67 / $5,700 = .279 27.9%

A borrower with a gross income of $3,000 per month would qualify for a housing payment of what amount - including taxes and insurance - using the housing expense ratio for a conventional mortgage?

Monthly Mortgage Payment: GMI x Front Ratio $3,000 x .28 = $840

Semi-Monthly/Bi-Monthly (twice a month)

Semi-monthly salary x 24 = GMI

According to the MDIA (Mortgage Disclosure Improvement Act) , a "higher-priced loan" is one that has:

an APR that exceeds the applicable average prime offer rate by at least 1.5% on first liens.

When calculating the debt ratio, the calculation that best represents the front ratio is

monthly housing debt divided by gross monthly income.

A borrower has a mortgage loan to purchase a $500,000 home with an 80% loan-to-value ratio. Based on this information, what will the borrower pay as a down payment?

$500,000 x .20 = 100,000

What will be the monthly PMI on a 90% LTV loan for a property valued at $500,000 if the monthly PMI factor is 0.60%?

$500,000 x.90 = $450,000 $450,000 x .0060 = $2,700 / 12 = $225

A seller agrees to pay two points on a buyer's loan. The price is $60,000 and the buyer is making a 20% down payment. Two points equal

$60,000 x .20 = $12,000 $60,000 - $12,000 = $48,000 $48,000 x .02 = $960

If a borrower pays $695.20 for principal and interest every month for 30 years on his $110,000 loan, how much interest will she pay over the life of the loan?

$695.20 x 12 months = 8,342.40 $8,342.40 x 30 years = $250,272 $250,272 - $110,000 = $140,272

A borrower who is paid $750 per week has a qualifying monthly income of:

$750 x 52 /12 =$3,250

Your refinancing borrower qualifies for a 95% LTV and has a payoff of $70,000. How much cash is available if the appraisal is $95,000 and the closing costs are $3,000?

$95,000 X .95 = $90,250 - $70,000 - $3,000 = $17,250

An eligible borrower applies for an FHA loan on a house with an appraised value of $100,000 and a purchase price of $96,000. What is the required minimum investment?

$96,000 x .035 = $3,360

What is the formula for the debt-to-income ("bottom" or "back-end") ratio?

All recurring monthly debts divided by gross monthly income

A Higher Cost Loan is defined by TILA as one that has:

An APR that exceeds the applicable average prime offer rate by at least 6.5%. on the first lien.

You are refinancing a $200,000 mortgage with a prepayment penalty of six months of interest at 6.5%. How much is the prepayment penalty?

Annual Interest: $200,000 x .065 = $13,000 6 Months Interest: $13,000 / 2 = $6,500

Mary wants to obtain FHA insured financing on her primary home. Her housing expense will be $800.65. She also has the following debt: $192.65 (auto payment) and $40 (revolving credit account). Based on her debt, what would be Mary's required stable monthly gross income to qualify for this loan using the total debt-to-income ratio?

Back-End Ratio: $800.65 + $192.65 + $40 = 1,033.30 1,033.30 / .43 = $2,403.02

Bi-Weekly Salary (every two weeks)

Bi-weekly pay x 26 / 12 = GMI

A borrower is applying to refinance his mortgage. His first mortgage is $25,000 at a 9% rate. He plans to get cash out, up to $40,000. He qualifies for an 80% LTV and his house appraises for $100,000. Shortly before closing, the title exam shows $23,000 in bond liens. Closing costs total $6,000. How much cash will he receive at closing?

Borrower is applying to refinance his mortgage. How Much Cash Will He Receive At Closing? $100,000 x .08 = $80,000 $80,000 - $25,000 -$23,000 - $6,000 = $26,000

A borrower offers to purchase a home for $120,000: His first mortgage amount is $90,000, the seller is providing a second mortgage of 15% of the sale price, and the borrower provides the balance as a cash down payment. What is the LTV? What is the CLTV?

LTV: 1st Loan Amount / Less of the Sales Price or Appraised Value $90,000 / $120,000 = .75 75% CLTV: 1st Loan Amount + 2nd Loan Amount / Less of the Sales Price or Appraised Value $120,000 x .15 = $18,000 $120,000 - $18,000 = $102,000 $102,000 / $120,000 = .85 85%

What is the loan-to-value if the loan amount is $118,000, the appraised value is $131,000 and the sales price is $135,000?

LTV: Loan Amount / Lesser of the Sales Price or Appraised Value. $118,000 / $131,000 = .90 90% LTV

A potential borrower is applying for a conventional loan to purchase a primary residence. Currently, he pays $500 in rent, $420 for an auto loan, $170 toward his VISA bill, and $300 on a student loan each month. His gross monthly income totals $4,900, and his take-home pay after taxes is $3,700. What is the maximum housing payment for which he can qualify?

Maximum Housing Payment: Conventional: 28/36 1.) GMI x Front Ratio 2.) GMI x Back Ratio 3.) Lower of the two. 1.) $4,900 x .28 = $1,372 2.) $4,900 x .36 = $1,764 - $890 = $874 Debt: $420 + $170 + $300 = $890 3.) Lower of the two. Answer: $874

An applicant for a mortgage has recurring monthly debt of $425 and a gross monthly income of $3,850. For a conforming loan, what is the maximum house payment—including principal, interest, taxes, and insurance—for which she qualifies?

Maximum Monthly Payment: 1.) GMI x .28 2.) GMI x .36 3.) Lower of the two. Maximum Monthly Payment: 1.) $3,850 x .28 = $1,078 2.) $3,850 x .36 - $425 = $961 3.) Lower of the two. Answer: $961! :)

A borrower's stable monthly income is $2,500. He has three monthly debts: $250 car payment, $100 personal loan payment, and $50 credit card payment. What is the maximum monthly mortgage payment he would qualify for using the total debt to income ratio for a conventional loan?

Maximum Monthly Payment: 1.) GMI x Front Ratio 2.) GMI x Back Ratio 3.) Lower of the two. 1.) $2,500 x .28 = $700 2.) $2,500 x .36 = $900 - $250 - $100 - $50 = $500 3.) Lower of the two. Answer: $500! :)

A borrower's stable monthly income is $6,800. Every month he pays $485 car payment, $200 revolving credit payment, and $1,500 alimony. What is the maximum monthly mortgage payment for which he would qualify for an FHA mortgage loan?

Maximum Monthly Payment: 1.) GMI x Front Ratio 2.) GMI x Back Ratio 3.) Lower of the two. Maximum Monthly Payment: 1.) $6,800 x .31 = $2,108 2.) $6,800 x .43 = $2,924 - $485 - $200 - $1,500 = $739 3.) Lower of the two. Answer: $739! :)

You are pre-qualifying a borrower for a purchase loan. She has debt equaling $950 each month and gross monthly income totaling $5,200 each month. What is the maximum qualifying house payment, including principal, interest, taxes and insurance on a conventional loan?

Maximum Monthly Payment: 1.) GMI x Front Ratio 2.) GMI x Back Ratio 3.) Lower of the two. Maximum Monthly Payment: 1.) 5,200 x .28 = $1,456 2.) 5,200 x .36 = $1872 - $950 = $922 3.) Lower of the two. Answer: $922! :)

A borrower has a stable monthly income of $4,000 and recurring debts of $600. If he's getting an FHA loan, what's the maximum monthly payment for which he would qualify?

Maximum Monthly Payment: GMI x Front Ratio $4,000 x .31 = $1240 GMI x Back Ratio $4,000 x .43 = $1,720 - $600 =$1,120

A homeowner's house appraises for $125,000. He qualifies for an 85% LTV. He owes $63,000 on his first mortgage and $5,000 on his second mortgage. He would like to refinance his house into one mortgage loan and receive additional cash to pay off other debt. How much cash would be available if his closing costs are $4,200 and are financed in the loan?

Maximum loan amount the borrower qualifies for: $125,000 x .85 = $106,250 Subtract the current debt & closing costs: $106,250 - $63,000 - $5,000 - $4,200 = $34,050 Answer: $34,050

A borrower with a gross income of $3,000 per month would qualify for a housing payment of what amount—including taxes and insurance—using the housing expense ratio for a conventional mortgage?

Monthly Housing Payment: GMI x Front Ratio $3,000 x .28 = $840

Monthly Salary

Monthly pay / 12 = GMI

At what LTV is a borrower required to have mortgage insurance on a USDA loan?

Mortgage insurance is never required.

A borrower has a loan with an outstanding principal balance of $350,000, an interest rate of 7.375%, a principal and interest payment of $2,693 with a 2% prepayment penalty in effect. If the borrower pays off the loan today, what would be the amount of the prepayment penalty?

Principal balance owed at the time x % of the prepay penalty. $350,000 ×.02 = $7,000

Back-End Ratio

Principal, Interest, Taxes, and Insurance + Debt / GMI

Housing Expense Ratio

Principal, Interest, Taxes, and Insurance / GMI

A seller takes back a $150,000 mortgage at 6% interest. Payments are interest-only for 10 years. What balloon payment amount will be due?

The entire principal must be repaid at the end of the loan term since the borrower paid only interest for 10 years. Answer: $150,000

An 80/20 combo loan with the sales price of $175,000, a rate of 6% for the 80% first mortgage, and a rate of 8.5% for the 20% second mortgage would have a first mortgage loan amount of what?

The first mortgage is 80% of the sale price: $175,000 x .80 = $140,000

Borrower A has a $100,000 30-year loan at 5%. Borrower B has a $100,000 15-year loan at 5.5%. At the end of their respective loan terms, who will have paid more principal?

The principal never changes! Answer: Both borrowers would pay the same amount of principal.

What is the total monthly payment, including escrows, on a 30-year interest only loan of $205,000, taxes of $1,800 per half, hazard insurance of $420 annually, $65 monthly mortgage insurance, and an interest rate of 6%.

Total Monthly Payment: $205,000 x .06 = $12,300 / 12 = $1,025 Note: Taxes are quoted by half a year. $1,800 / 6 = $350 Note: Hazard insurance is quoted annually. $420 / 12 = $35 Note: Mortgage insurance is quoted per month. $65 per month). $1,025 + $300 + $35 + $65 = $1,425

What is the correct calculation used to determine gross monthly income, for a borrower paid by the hour?

hourly rate x hours worked weekly x 52 / 12

What is the loan-to-value if the loan amount is $118,000, the appraised value is $131,000 and the sales price is $135,000?

$118,000 / $131,000 = .09 90%

Roy is a veteran who is buying a home with a VA loan. The mortgage loan amount is $132,000. What is the maximum amount the lender can charge for the costs and services for originating the loan?

$132,000 x .01 = $1,320

The minimum down payment contribution needed for a home with an FHA-appraised value of $132,000 (assuming appropriate FICO score) is

$132,000 x 3.5 = $4,620

Pam is buying a home with an FHA loan; it has an appraised value of $140,000 and the purchase price is $135,000. Pam's FICO score is 650. What is the minimum investment she is required to provide?

$135,000 x .035 = $4,725

What is the loan-to-value if the loan amount is $139,500, the appraised value is $164,117 and the sales price is $155,000?

$139,500 / $155,000 = .90 90%

A borrower is buying a house for $180,000, He provides a down payment of $40,000. If he pays three discount points, what is the total cost of the points?

$180,000 - $40,000 = $140,000 $140,000 x .03 = $4,200

Harold is refinancing his home. The property appraises for $260,000, and Harold's loan amount is $195,000. What is the loan-to-value for this transaction?

$195,000 / $260,000 = .75 75%

Your client is purchasing a home for $200,000 using FHA financing and wishes to put down the minimum amount allowable under the program guidelines. Assuming the property appraises for $196,000 and there are no changes to the sales contract, what is the minimum dollar amount ("cash investment") that would be required to get this transaction to the closing table? (Down payment only - no closing costs/MIP.)

$196,000 x .035 = $6,860

A $200,000 interest-only loan has an interest rate of 6%. What is the monthly interest-only payment?

$200,000 x .06 / 12 = $1,000

A borrower is buying a house with a sales price of $200,000 and an LTV of 75%. If he pays two discount points, what is the total cost of the points?

$200,000 x .75 = $150,000 $150,000 x .02 = $3,000

Susan is purchasing a house for $200,000. It was appraised for $220,000. In order to avoid paying PMI on this conventional loan, how much should Susan put down on this house?

$200,000 x .80 = $160,000 $200,000 - $160,000 = $40,000

Larry is refinancing his $360,000 home with two mortgages. The first lien will be a 30-year fixed rate with a loan amount of $216,000. The second lien will be a Home Equity Line of Credit with a limit of $54,000; however, Larry will only draw $36,000 at closing. Which of the following statements is true?

$216,000 + $54,000 / $360,000 = .75

Bob is buying a house. It was appraised at $236,000, the sales price is $228,000, and the loan amount is $216,800. In order to buy down his interest rate, Bob is willing to pay 2 points in addition to the 1 point in loan origination fees. What is the price of Bob's discount points?

$216,800 x .03 = $4,336

Borrower Stu wants an FHA loan for a home priced at $253,500 and appraised for $257,000. After paying the 3.5% minimum down payment, what is the amount of the 1.75% Upfront Mortgage Insurance Premium (UFMIP) for borrower Stu?

$253,500 x .035 = 8872.50 $253,500 - $8,872.50 = $244,627.5 $244,627.50 x .0175 = $4,280.98

You are working with borrowers who are refinancing their primary residence. The property appraises for $421 ,000 and your client wants two separate loans. The first loan will be a 15-year fixed-rate with a loan amount of $274,000, and the second loan will be a home equity line of credit having a credit limit of $41 , 750 with $21 ,000 of that being drawn at closing. What is the HCLTV for this transaction?

$274,000 + $41,750 = $315,750 $315,750 / $421,000 = .75 75%

A borrower has a stable monthly gross income of $3,200 and recurring monthly debts of $370. What is the maximum amount of money available to him for monthly housing expenses in order to qualify for a conforming loan?

$3,200 x .36 = $1,152 $1,152 - $370 = $782

ABC Mortgage Company has been accused of inappropriately calling two consumers on the National Do Not Call Registry. What is the total maximum fine ABC could incur for this?

$32,000

A borrower reports income of $40,000 from rental properties. How much of that should be considered when applying for a mortgage loan?

$40,000 x .75 = $30,000

A borrower is buying a house for $150,000 at 6.5%. He provides a down payment of $15,000. How much would he have to pay for three discount points?

$150,000 - $15,000 =$135,000 $135,000 x .03 = $4,050

A buyer with a credit score of 703 makes an offer of $156,000 on a house that was appraised for $162,000. If the seller accepts his offer, how much will he have to pay down on an FHA loan?

$156,000 x .035 = $5,460

The penalty per occurrence per day for violating the National Do Not Call regulation is:

$16,000

A borrower has the following minimum payments due monthly: Mortgage PITI $1,100, Auto loan with 12 payments remaining - $350, Auto lease with 3 payments remaining - $250, Electric bill - $110, Gas bill - $80, Student loan with 92 payments remaining - $60, Visa credit card - $50. Given this set of data, what amount would the underwriter use to calculate the borrower's total debt ratio in a conventional conforming loan?

$1,100 + $350 + $250 + $60 + $50 = $1,810

An applicant for a mortgage loan is a salaried employee who is paid $1,350 every two weeks. In addition, she indicates that she receives $500 a month in alimony. What is the gross monthly income you can use to qualify her?

$1,350 x 26 / 12 = $2,925 **Note: Gross up the alimony by 25%. $500 x .25 = $125 $125 + $500 = $625 or $500 x 1.25 = $625 Grossing it up by 25%, in essence, is 1.25. $2,925 + $625 = $3,550 😎

A borrower is buying a house for $100,000. He provides a down payment of $5,000. If he pays two discount points, what is the total cost of the points?

$100,000 - $5,000 = $95,000 $95,000 x .02 = $1,900

When qualifying a borrower, an installment debt does not need to be included in the debt to income ratio when the balance of the term of repayment is less than how many months?

10

By The Hour Salary

Hourly rate x hours worked weekly x 4 x 52 / 12 = GMI

Weekly Salary

Number of weeks x 52 / 12 = GMI

How much would the minimum monthly payment be on a 30-year loan with a balance of $100,000, an interest rate of 6%, and interest-only payments?

$100,000 x .06 / 12 = $500

The sales price of a home is $100,000 on a 90% LTV 30-year fixed mortgage. Fannie Mae/Freddie Mac requires 25% coverage, giving us a rate of 0.62%. What is the loan amount?

$100,000 x .90 = $90,000

A borrower offers $105,000 for a house that was appraised for $112,000. If the seller accepts the offer, what is the minimum down payment required for an FHA loan (assuming a FICO score of at least 580)?

$105,000 x .035 = $3,675

A borrower offers $105,000 for a house that was appraised for $112,000. If the seller accepts the offer, what is the minimum down payment required for an FHA loan?

$105,000 x 3.5% $105,000 x .035 = $3,675

What is the loan-to-value ratio if the loan amount is $100,000, the appraised value is $125,000 and the sales price is $127,000?

$100,000 / $125,000 = .80 80%

The down payment requiremend for a VA loan ca be as little as

0%

What is the maximum LTV on a Rural Development loan?

100%

What is the maximum LTV allowed for VA loans?

100% VA loan guidelines allow for 100% LTV, which means that no downpayment is required for most VA borrowers.

Qualifying guidelines on a Conventional loan are

28% housing ratio and 36% total DTI

Qualifying guidelines for a USDA loan are

29% housing ratio and 41% total DTI

Prepayment penalties on residential mortgages, when allowed by law, are limited to a maximum of ___________ of the unpaid principal balance in the first year of the loan.

3%

Qualifying guidelines on an FHA loan are

31% housing ratio and 43% total DTI

In general, what is the maximum total debt-to-income ratio for borrowers who want an FHA loan absent any compensating factors?

43%

Qualifying guidelines on a VA loan are

43% total DTI

Ron is applying for an ARM. Currently, the index is 5.50% and the margin is 2.25%. What is the fully indexed rate that Ron will pay on his loan?

5.50% + 2.25% = 7.75%

A borrower has an ARM with an initial rate of 6% and a rate cap 2/6. What's the highest his interest rate could be over the life of the loan?

6% + 6% = 12%

Conventional mortgages require mortgage insurance once the LTV exceeds:

80%

A borrower has been at her job for 10 years and typically works overtime 5 hours per week at time and a half. Her hourly rate is $15.75. What is the gross monthly income you can use to qualify her?

Gross Monthly Income: $15.75 x 40 x 52 / 12 = $2,730 Over Time: $15.75 x 1.5 = $23.625 x 5 = $118.125 $118.125 x 52 / 12 = $511.875 $2,730 + $511.875 = $3241.875 Answer: $3241.88

A lender gave a borrower an ARM with a 3% introductory rate. At the time, the index associated with the ARM was at 2%, and the lender's margin for the loan is also 2%. The ARM has a 3% initial and periodic cap. The loan has reached its first adjustment period, but the index for the loan has not changed. What is the ARM's new interest rate?

Index = 2% Margin = 2% 2% + 2% = 4% Interest Rate

A borrower is purchasing a home for $120,000 and closing cost total 4% of the purchase price. The seller has agreed to contribute 2% of the purchase price toward the buyer's closing costs. How much cash would the borrower need at closing in order to obtain an LTV of 85%?

Note: 100% - 85% = 15%, so it's .15 $120,000 x .15 = $18,000 $120,000 x .02 = $,2400 $18,000 + $2,400 = $20,400

A borrower is purchasing a home for $120,000 and closing costs total 4% of the purchase price. The seller has agreed to contribute 2% of the purchase price toward the buyer's closing costs. How much cash would the borrower need at closing in order to obtain an LTV of 85%?

Note: 100% - 85% = 15%, so it's .15 $120,000 x .15 = $18,000 $120,000 x .02 = $,2400 $18,000 + $2,400 = $20,400

An applicant is purchasing a home for $100,000 utilizing FHA financing. The home appraises for $98,000. What is the minimum dollar amount that the borrower must contribute as a down payment on this transaction?

Note: Always use the lesser of the two from the Sales, Appriased Value. $98,000 x .035 = $3,430

Gary is an applicant for a Section 502 guaranteed loan. The AMI for his community is $45,000. With which of the following income levels would Gary be eligible for the Section 502 loan?

Note: Applicants can have an income of up to 115% of the median income for the area. $45,000 x 1.15 = 51,750