Mortgage Loan Originator Mortgage Math and Calculations 2 — Questions and Answers
Question 1: A borrower earns $85,000 annually. What is their gross monthly income used for qualifying purposes?
- $6,500
- $7,083 (Correct answer)
- $7,500
- $8,500
Correct answer: $7,083
$85,000 ÷ 12 = $7,083.33 gross monthly income.
Question 2: A property is worth $350,000 and the loan balance is $245,000. What is the borrower's equity percentage?
- 30% (Correct answer)
- 35%
- 45%
- 70%
Correct answer: 30%
Equity = $350,000 - $245,000 = $105,000; $105,000 ÷ $350,000 = 30% equity.
Question 3: A borrower is applying for a $300,000 mortgage. The lender charges 1.5 origination points. What is the origination fee?
- $1,500
- $3,000
- $4,500 (Correct answer)
- $6,000
Correct answer: $4,500
1.5% × $300,000 = $4,500 origination fee.
Question 4: A 30-year mortgage for $200,000 at 5% has a monthly payment of $1,073.64. What is the approximate total interest paid over the life of the loan?
- $100,000
- $186,510 (Correct answer)
- $200,000
- $173,911
Correct answer: $186,510
Total payments = $1,073.64 × 360 = $386,510; total interest = $386,510 - $200,000 = $186,510.
Question 5: A borrower's monthly PITI payment is $1,800 and their gross monthly income is $5,500. What is their front-end DTI ratio?
- 30.9%
- 32.7% (Correct answer)
- 33.3%
- 35.0%
Correct answer: 32.7%
$1,800 ÷ $5,500 = 0.3272, or approximately 32.7% front-end DTI.
Question 6: A property appraises for $275,000. The maximum LTV for a conventional loan is 80%. What is the maximum loan amount?
- $200,000
- $220,000 (Correct answer)
- $225,000
- $250,000
Correct answer: $220,000
$275,000 × 0.80 = $220,000 maximum loan amount at 80% LTV.
Question 7: A $150,000 ARM starts at 4% with a 2% annual cap and a 6% lifetime cap. What is the maximum interest rate this loan can ever reach?
- 6%
- 8%
- 10% (Correct answer)
- 12%
Correct answer: 10%
Initial rate of 4% plus the lifetime cap of 6% gives a maximum possible rate of 10%.
Mortgage Loan Originator Mortgage Math and Calculations 2
A borrower earns $85,000 annually.
What is their gross monthly income used for qualifying purposes?