1. How much interest is paid over the entire term of a $60,000, 30 year loan at 13% if it has fixed monthly
principal and interest payments of $663.72?
2. What is the principal balance after one payment on a $110,000 loan at 7.5 %, if it has fixed monthly
principal and interest payments of $769.14 for 30 years?
3. A borrower signs a loan agreement for $85,000. Out of this, the lender charges a 1% loan origination fee
and two discount points. How much net cash does the borrower receive?
4. A couple bought a home for $90,000 with a 20% down payment. Ten years later the house is worth
$120,000 with the loan balance being reduced to $65,000. What is the percent of equity increase?
5. If a lender wants a yield or rate of return of 9 ½ %, but is only charging an interest rate of 8 ¾ %, how
many discount points will be charged by the lender at closing?
6. McCabe bought a house with a mortgage loan of $61,500. The monthly principal and monthly interest
payments will be $7.70 per $1,000 of the loan amount. The annual property taxes are $496.20. The
homeowner’s policy is $240.00 per year. Calculate McCabe’s monthly payment including principal,
interest, taxes and insurance (PITI).
7. The Kellys received $19,000 from the sale of their house to apply toward the purchase of a new home
costing $90,000. They assumed an existing mortgage of $49,500 and borrowed $24,000 at 12% to be
secured by a second mortgage. The lender charged them a ½% assumption fee; a 1 % origination fee on the
second; and 2 points on the new loan. How much was the lender paid?
8. A prospective buyer who has contracted to buy a house for $75,000 applies to a lender for $70,000
conventional mortgage loan to finance the purchase. The buyer’s gross annual income is $30,000. The
lender determines that the buyer’s housing expenses would be $720 per month and that the buyer’s expenses
for recurring obligations (excluding housing expenses) are $300 per month. Does the buyer qualify under
the 28/36 ratios?
9. A lender requires applicants for conventional mortgage loans to qualify under both the 28 and 36 ratios.
The Bakers have a gross annual income of $36,000 and have recurring obligations (excluding housing
expenses) totaling $400 per month. In order to qualify for a conventional loan under both the above
standards, the Baker’s monthly housing expenses must not exceed what amount?
1.
$663.72 x 360 = $238,939.20 total P + I
– 60,000.00 Principal (loan amount)
$178,939.20 Interest amount over life of loan
2.
$110,000 x .075 = 8,250 ÷ 12 = 687.50 Int
3.
$85,000 x .03 = $2,550 points and orig. fee
4.
90,000 Purchase
(18,000) Down Payment
72,000 Loan
72,000 Mortgage
-65,000 Balance
7,000 Reduction
5.
Lender wants yield of:
Interest rate charged:
7,000 + 30,000
= 37,000
2.06
206%
769.14 P+I
-687.50 Int
$81.64 Prin
110,000.00 Before Payment
-81.64 Principal Paid
$109,918.36 After Payment
Net Cash = $82,450
120,000 New Value
-90,000 Paid
30,000 Increase
18,000
Original equity (down payment)
9½% =
8¾% =
Lender Needs:
9 & 4/8 %
(8 & 6/8 %)
6/8 % more yield
Need 6 points (1/8 % increase for each point from borrower)
6.
$61,500 ÷ $1,000 = 61.5 units of $1,000 each
61.5 x $7.70 = $473.55 P & I
+ 61.35 Taxes & Insurance
$534.90 PITI
7.
a. $247.50 Assumption fee (.005 x $49,500)
b. $720.00 ($24,000 x .03) (1% origination fee + 2% discount points)
c. Fees and points = $967.50
8.
NO
720 Mo.HousingExp = 29%
2,500 MoGrossInc
1,020 TotalMoRecurringDebt = 40%
2,500 MoGrossInc
Does NOT pass either test
9.
.36 x $3,000 mo. = $1,080 Total Mo. Recurring Debt allowed
-400 Other Mo. Debt already owed
$ 680 Maximum Mo.HousingExp allowable under 36% Ratio