Mortgage Underwriting and Financial Calculations 2

Question 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?

Accepted Answer

32.3%

Answer

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

Question 2

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

Accepted Answer

Borrower's credit score

Answer

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

Question 3

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

Accepted Answer

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

Answer

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

Question 4

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

Accepted Answer

90%

Answer

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

Question 5

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

Accepted Answer

43%

Answer

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

Mortgage Practice Test