Mortgage Math and Calculations Flashcards
7 cards from real Mortgage Loan Originator practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mortgage Math and Calculations flashcards as text
A borrower has gross monthly income of $7,000, a monthly mortgage payment of $1,600, and other monthly debt payments of $400. What is the back-end DTI?
Answer: 28.6%
Total monthly debt = $1,600 + $400 = $2,000; $2,000 ÷ $7,000 = 28.6% back-end DTI.
A $180,000 loan has an APR of 6.5% and a note rate of 6.0%. Why is the APR higher than the note rate?
Answer: The APR includes fees and costs spread over the loan term
APR includes the note rate plus fees such as points and origination charges amortized over the loan term, making it higher than the note rate.
A borrower pays $3,600 in discount points to lower their rate. Their monthly savings from the rate reduction is $75. How many months until the borrower breaks even?
Answer: 48 months
$3,600 ÷ $75 per month = 48 months to recoup the cost of the discount points.
A self-employed borrower shows net Schedule C income of $60,000 in Year 1 and $72,000 in Year 2. What is the qualifying monthly income?
Answer: $5,500
Average of two years: ($60,000 + $72,000) ÷ 2 = $66,000; $66,000 ÷ 12 = $5,500 monthly qualifying income.
A borrower makes a $15,000 down payment on a $150,000 home. PMI is required when LTV exceeds 80%. Will this borrower need PMI?
Answer: Yes, because the LTV is 90%
LTV = $135,000 ÷ $150,000 = 90%, which exceeds the 80% threshold, so PMI is required.
A buyer's FHA loan amount is $240,000 with an annual MIP rate of 0.85%. What is the monthly MIP payment?
Answer: $170
$240,000 × 0.0085 = $2,040 annual MIP; $2,040 ÷ 12 = $170 monthly MIP payment.
A borrower earns $4,500/month from employment and $800/month in rental income. The lender uses 75% of rental income. What is the qualifying monthly income?
Answer: $5,100
$4,500 + (75% × $800) = $4,500 + $600 = $5,100 total qualifying monthly income.