Mortgage Finance and Calculations Flashcards

A borrower has a gross monthly income of $6,000 and a proposed PITI payment of $1,500. What is the front-end DTI ratio?

Answer: 25%

Front-end DTI = $1,500 / $6,000 = 25%.

Which loan component is included in PITI but NOT in the principal and interest payment?

Answer: Hazard insurance escrow

PITI stands for Principal, Interest, Taxes, and Insurance — escrow items added on top of P&I.

A $200,000 mortgage at 6% annual interest has a first-month interest charge of how much?

Answer: $1,000

$200,000 × 0.06 / 12 = $1,000 in interest for the first month.

What does a loan's Annual Percentage Rate (APR) represent compared to the note rate?

Answer: The cost of credit expressed as a yearly rate including fees

APR includes the interest rate plus fees and costs, providing a broader measure of borrowing cost.

On a $300,000 loan with 2 discount points, how much does the borrower pay upfront for the points?

Answer: $6,000

Each point equals 1% of the loan amount; 2 points × $300,000 = $6,000.

A borrower's loan has a LTV of 85%. If the appraised value is $400,000, what is the loan amount?

Answer: $340,000

$400,000 × 0.85 = $340,000.

Which amortization type results in the borrower owing more than the original loan balance after making scheduled payments?

Answer: Negative amortization

Negative amortization occurs when payments are less than the interest due, causing the balance to increase.