SAFE Products and Calculations 3

Question 1

A borrower's gross monthly income is $6,000. Their proposed PITI is $1,500 and monthly debts total $600. What is their back-end DTI ratio?

Accepted Answer

35%

Answer

Back-end DTI = (PITI + monthly debts) / gross monthly income = ($1,500 + $600) / $6,000 = 35%.

Question 2

One discount point paid on a $200,000 loan equals:

Accepted Answer

$2,000

Answer

One point equals 1% of the loan amount, so 1 point on $200,000 = $2,000.

Question 3

Which of the following best describes a balloon mortgage?

Accepted Answer

A loan with small periodic payments and a large lump-sum payment due at maturity

Answer

A balloon mortgage has regular (often interest-only or partially amortizing) payments with the remaining balance due in full at a set end date.

Question 4

VA loans require a funding fee. Which borrower category typically receives a funding fee exemption?

Accepted Answer

Veterans receiving VA disability compensation

Answer

Veterans with service-connected disabilities receiving VA compensation are exempt from the VA funding fee.

Question 5

The index on an ARM is 3.25% and the margin is 2.5%. What is the fully indexed rate?

Accepted Answer

5.75%

Answer

Fully indexed rate = Index + Margin = 3.25% + 2.50% = 5.75%.

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test