Term
| A borrower has a $100,000 loan @ 6% interest. What are the annual and monthly payments? |
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Definition
Annual payment = $100,000 x .06 = $6,000
Monthly payment = $6,000 ÷ 12 = $500 |
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Term
| A borrower obtains a 10-year interest only loan of $50,000 @ 6%. How much interest will he or she pay? |
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Definition
| ($50,000 x .06 x 10) = $30,000 |
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Term
| A borrower obtains a 10-year amortized loan of $50,000 @ 6% with monthly payments of $555.10. How much interest will he or she pay? |
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Definition
| ($555.10 x 12 x 10) - $50,000 = $16,612 |
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Term
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Definition
Month 1: Principal paid = Monthly payment - (Loan amount x Rate ÷ 12)
Month 2: New loan amount = (Previous month principal - Principal paid)
Principal paid = Monthly payment - (New loan amount x Rate ÷ 12) |
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Term
| A borrower obtains a 30-year $100,000 amortized loan @ 7% with a $665.31 monthly payment. What is the principal paid in the second month? |
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Definition
Month 1:
Principal paid = $665.31 - ($100,000 x 7% ÷ 12) = $665.31 - ($583.33 interest paid) = $81.98
Month 2:
New loan amount = $100,000 previous month beginning loan amount - $81.98 principal paid = $99,918.02
Principal paid = $665.31 - ($99,918.02 x 7% ÷ 12) = $665.31 - ($582.86 interest paid) = $82.45 |
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Term
| A borrower obtains a loan for $100,000 with a 6.3207 constant. What is the monthly payment? |
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Definition
| Monthly payment = ($100,000 ÷ 1,000) x 6.3207 = $632.07 |
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Term
| A borrower has a monthly payment of $632.07 on a loan with a monthly constant of 6.3207. What is the loan amount? |
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Definition
| Loan amount = ($632.07 ÷ 6.3207) x 1000 = $100,000 |
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Term
| A borrower obtains a loan for $100,000 with a monthly payment of $632.07. What is the loan constant? |
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Definition
| Loan constant = ($632.07 ÷ $100,000) x 1,000 = 6.3207 |
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Term
| A borrower pays $1,000 for a $50,000 loan. How many points are paid? |
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Definition
| $1,000 ÷ 50,000 = .02 = 2 points |
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Term
| A borrower pays 2 points on a $40,000 loan. What is the fee paid? |
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Definition
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Term
| A borrower has a $500,000 loan @ 5% interest. What are the annual and monthly payments? |
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Definition
Annual payment = $500,000 x .05 = $25,000
Monthly payment = $25,000 ÷ 12 = $2,083 |
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Term
| The loan officer at FirstOne Bank tells Amanda she can afford a monthly payment of $1,300 on her new home loan. Assuming this is an interest-only loan, and the principal balance is $234,000, what interest rate is Amanda getting? |
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Definition
| The equation for the interest rate is (annual payment / loan amount) = interest rate. Thus ($1,300 x 12) / $234,000 = 6.67%. |
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Term
| The Kruteks obtain a fixed-rate amortized 30-year loan for $280,000 @ 6.25% interest. If the monthly payments are $1,724, how much interest do the Kruteks pay in the second month of the loan? |
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Definition
| In the first month they pay interest of ($280,000 x 6.25%) / 12, or $1,458. If their fixed payment is $1,724, they paid down the principal by $266 ($1,724 - 1,458). Now they must pay 6.25% interest on the new principal balance of $279,734. This equals ($279,734 x .0625) / 12, or $1,456.95. |
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Term
| A borrower obtains a loan for $200,000 with a 4.3207 constant. What is the monthly payment? |
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Definition
| Monthly payment = ($200,000 ÷ 1,000) x 4.3207 = $864.14 |
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Term
| A borrower obtains a 5-year interest only loan of $20,000 @ 7%. How much interest will he or she pay? |
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Definition
| ($20,000 x .07 x 5) = $7,000 |
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Term
| A borrower can get a $265,600 loan on a $332,000 home. What is her LTV ratio? |
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Definition
| LTV Ratio = $265,600 ÷ $332,000 = 80% |
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Term
| A borrower can get an 80% loan on a $332,000 home. What is the loan amount? |
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Definition
| Loan = $332,000 x .80 = $265,600 |
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Term
| A borrower obtained an 80% loan for $265,600. What was the price of the home |
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Definition
| Price (value) = $265,600 ÷ .80 = $332,000 |
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Term
| A lender uses a 28% income ratio for the PI payment. A borrower grosses $30,000 per year. What monthly PI payment can the borrower afford? |
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Definition
| Monthly PI payment = ($30,000 ÷ 12) x .28 = $700 |
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Term
| How much can the borrower borrow if the loan constant is 6.3207? (See also- loan constants) |
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Definition
| Loan amount = ($700 ÷ 6.3207) x 1,000 = $110,747.22 |
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Term
| A lender uses a 36% debt ratio. A borrower earns $30,000 / year and has monthly non-housing debt payments of $500. What housing payment can she afford? |
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Definition
| Housing expense = ($30,000 ÷ 12 x .36) - 500 = ($900 - 500) = $400 |
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Term
| A mortgage lender uses an income qualification ratio of 28% for the monthly PITI payment. The Poormons earn $82,000 per year. If taxes are estimated to be $6,000 and insurance $1,200, how much can the Poormons afford to pay per month for the loan? |
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Definition
| First, the Poormons can afford a monthly PITI payment of ($82,000 / 12) x .28, or $1,913. Now take out monthly taxes and insurance to derive their maximum PI payment: ($1,913 – $600), or $1,313. ($6,000 annual taxes and insurance = =$600 /month). |
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Term
| A lender offers an investor a maximum 70% LTV loan on the appraised value of a property. If the investor pays $230,000 for the property, and this is 15% more than the appraised value, how much will the investor have to pay as a down payment? |
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Definition
| First, the sale price is 115% of the appraised value, so the appraised value is $230,000 / 115%, or $200,000. The lender will lend $140,000 (70% of appraised value), so the investor will have to come up with $90,000 ($230,000 – $140,000). |
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Term
| Assume FHA qualifies borrowers based on a 41% debt ratio, meaning that the borrower’s total monthly debt including the loan, taxes, insurance and non-housing debt cannot exceed 41% of the borrower’s monthly income. If a borrower grosses $4,000 per month and pays $600 monthly for non-housing debt obligations, what monthly payment for housing expenses can this person afford based on this ratio? |
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Definition
| The formula here is (housing debt + $600) / ($4,000 monthly income) = 41%. Solving for housing debt, we have (housing debt + $600) = (41% x $4,000). Thus (housing debt + $600) = $1,640. Subtracting out non-housing debt, we have (housing debt = $1,640 – 600), or housing debt = $1,040. |
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