Mortgage Loan Originator Mortgage Math and Calculations 3

Question 1

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?

Accepted Answer

28.6%

Answer

Total monthly debt = $1,600 + $400 = $2,000; $2,000 ÷ $7,000 = 28.6% back-end DTI.

Question 2

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?

Accepted Answer

The APR includes fees and costs spread over the loan term

Answer

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.

Question 3

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?

Accepted Answer

48 months

Answer

$3,600 ÷ $75 per month = 48 months to recoup the cost of the discount points.

Question 4

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?

Accepted Answer

$5,500

Answer

Average of two years: ($60,000 + $72,000) ÷ 2 = $66,000; $66,000 ÷ 12 = $5,500 monthly qualifying income.

Question 5

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?

Accepted Answer

Yes, because the LTV is 90%

Answer

LTV = $135,000 ÷ $150,000 = 90%, which exceeds the 80% threshold, so PMI is required.

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Mortgage Math and Calculations 3