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Underwriting and Financial Calculations Flashcards

7 cards from real Mortgage practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Underwriting and Financial Calculations flashcards as text

  1. A borrower earns $6,500/month gross income and has a proposed PITI of $1,750 plus monthly debts of $400. What is their back-end DTI ratio?

    Answer: 32.3%

    Back-end DTI = (PITI + monthly debts) / gross income = ($1,750 + $400) / $6,500 = 33.1%.

  2. Which factor does NOT directly affect a borrower's Loan-to-Value (LTV) ratio?

    Answer: Borrower's credit score

    LTV is calculated as loan amount divided by property value; credit score does not enter that formula.

  3. What does a Combined Loan-to-Value (CLTV) ratio measure?

    Answer: The ratio of all liens on a property to its appraised value

    CLTV combines all mortgage liens (first, second, HELOCs) and divides them by the appraised value.

  4. A property appraises for $320,000 and the borrower puts 10% down. What is the LTV?

    Answer: 90%

    Down payment = $32,000; loan = $288,000; LTV = $288,000 / $320,000 = 90%.

  5. What is the maximum allowable DTI for a Qualified Mortgage (QM) under the general definition?

    Answer: 43%

    The general QM definition caps the debt-to-income ratio at 43% to ensure the borrower's ability to repay.

  6. When calculating qualifying income for a self-employed borrower, underwriters typically average how many years of tax returns?

    Answer: Two years

    Agency guidelines generally require a two-year average of self-employment income using Schedule C or business returns.

  7. A loan with a 75% LTV on a conventional purchase would most likely:

    Answer: Not require PMI

    PMI is not required when LTV is 80% or below on conventional loans, so 75% LTV avoids PMI.