Question 1

Suppose you earn a gross income of $2,580 per month and apply for a mortgage with a monthly PITI of $830.76. You have other financial obligations totaling $118.68 per month. If the lending ratio guidelines are as given in the table below, what type of mortgage, if any, would you qualify for? $$\begin{array} { | l | l | l | } 
\hline \text { Mortgage Type } & \text { Housing Expense Ratio } & \text { Total Obligations Ratio } \
\hline \text { FHA } & 29 \% & 41 \% \
\hline \text { Conventional } & 28 \% & 36 \% \
\hline
\end{array}$$

Accepted Answer

The answer of Suppose you earn a gross income of...

Question 2

Using Table 14-1 from your text, calculate the required information for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
& & \text { Term } & \# o f & & & \
\text { Amount } & \text { Interest } & \text { of } & \$ 1,000 \mathrm {~s} & \text { Table } & \text { Monthly } & \text { Total } \
\text { Financed } & \text { Rate } & \text { Loan } & \text { Financed } & \text { Factor } & \text { Payment } & \text { Interest } \
\$ 46,700 & 4 \frac { 1 } { 4 } \% & 10 \text { years } & & & &
\end{array}$$

Accepted Answer

The answer of Using Table 14-1 from your text, calculate...

Question 3

Yara owns a home that was recently appraised for $189,000. The balance on the existing mortgage is $84,450. If Yara's bank is willing to loan up to 75% of the appraised value, find the potential amount of credit available on a home equity loan.

Accepted Answer

First, calculate 75% of the appraised value: 0.75 * $189,000 = $141,750. Then, subtract the existing mortgage balance from this amount to find the potential credit available: $141,750 - $84,450 = $57,300.

Question 4

Carlos owns a home that was recently appraised for $132,000. The balance on the existing mortgage is $73,700. If Carlos's bank is willing to loan up to 75% of the appraised value, find the potential amount of credit available on a home equity loan.

Accepted Answer

The answer of Carlos owns a home that was recently...

Question 5

A mortgage applicant who has a monthly gross income of $2,780 applies for a mortgage with a monthly PITI of $689.44. The applicant's other financial obligations total $405.88 per month. If the lending ratio guidelines are as given in the table below, what type of mortgage, if any, would the applicant qualify for? $$\begin{array} { | l | l | l | } 
\hline \text { Mortgage Type } & \text { Housing Expense Ratio } & \text { Total Obligations Ratio } \
\hline \text { FHA } & 29 \% & 41 \% \
\hline \text { Conventional } & 28 \% & 36 \% \
\hline
\end{array}$$

Accepted Answer

The applicant's housing expense ratio for the mortgage (PITI / gross income) is $689.44 / $2,780 = 24.8%, and the total obligations ratio (PITI + other obligations) / gross income is ($689.44 + $405.88) / $2,780 = 39.3%. These ratios fall within the FHA guidelines (29% and 41%, respectively) but not within the conventional guidelines (28% and 36%, respectively), so the applicant qualifies for an FHA mortgage only.

Question 6

Your home was recently appraised for $179,000. The balance on your existing mortgage is $115,050. If your bank is willing to loan up to 70% of the appraised value, what is the potential amount of credit available on a home equity loan?

Accepted Answer

The answer of Your home was recently appraised for $179,000....

Question 7

Using Table 14-1 from your text, calculate the required information for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
& & \text { Term } & \# \text { \#of } & & & \
\text { Amount } & \text { Interest } & \text { of } & \$ 1,000 \mathrm {~s} & \text { Table } & \text { Monthly } & \text { Total } \
\text { Financed } & \text { Rate } & \text { Loan } & \text { Financed } & \text { Factor } & \text { Payment } & \text { Interest } \
\$ 30,000 & 7 \frac { 1 } { 2 } \% & 15 \text { years } & & & &
\end{array}$$

Accepted Answer

The answer of Using Table 14-1 from your text, calculate...

Question 8

You bought a home with an adjustable-rate mortgage. The margin on the loan is 4.3% and the rate cap is 5.75% over the life of the loan. If the current index rate is 7.25%, what is the calculated interest rate of the ARM?

Accepted Answer

The calculated interest rate of the ARM is the current index rate plus the margin. In this case, the current index rate is 7.25% and the margin is 4.3%, so the calculated interest rate is 7.25% + 4.3% = 11.55%.

Question 9

Using Table 14-1 from your text, calculate the required information for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
& & \text { Term } & \# \text { \#of } & & & \
\text { Amount } & \text { Interest } & \text { of } & \$ 1,000 \mathrm {~s} & \text { Table } & \text { Monthly } & \text { Total } \
\text { Financed } & \text { Rate } & \text { Loan } & \text { Financed } & \text { Factor } & \text { Payment } & \text { Interest } \
\$ 86,000 & 9 \frac { 1 } { 4 } \% & 20 \text { years } & & & &
\end{array}$$

Accepted Answer

The answer of Using Table 14-1 from your text, calculate...

Question 10

Calculate the monthly principal and interest (PI), using Table 14-1 from your text, and the monthly PITI for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
\text { Amount } & \text { Interest } & \text { Term of } & \text { Monthly } & \text { Annual } & \text { Annual } & \text { Monthly } \
\text { Financed } & \text { Rate } & \underline { \text { Loan } } & \underline { \text { PI } } & \underline { \text { Property Tax } } & \underline { \text { Insurance } } & \text { PITI } \
\$ \$ 150,000 & 5 \frac { 3 } { 4 } \% & 30 \text { years } & & \$ 3,572 & \$ 812 &
\end{array}$$

Accepted Answer

The answer of Calculate the monthly principal and interest (PI),...

Question 11

Erin Casey purchased a home with a $90,000 mortgage at 9 1/2% for 30 years. Calculate the monthly payment and prepare an amortization schedule for the first four months of Erin's loan. $$\begin{array} { l l l l l } 
\text { Payment } & \text { Monthly } & \text { Monthly } & \text { Portion used to } & \text { Loan } \
\text { Number } & \underline { \text { Payment } } & \underline { \text { Interest } } & \underline { \text { Reduce Principal } } & \underline { \text { Balance } } \
& & & & \$ 90,000\
1&&&&&\
2&&&&&\
3&&&&&\
4&&&&&
\end{array}$$

Accepted Answer

The answer of Erin Casey purchased a home with a...

Question 12

Calculate the monthly principal and interest (PI), using Table 14-1 from your text, and the monthly PITI for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
\text { Amount } & \text { Interest } & \text { Term of } & \text { Monthly } & \text { Annual } & \text { Annual } & \text { Monthly } \
\text { Financed } & \underline { \text { Rate } } & \underline { \text { Loan } } & \underline { \text { PI } } & \underline { \text { Froperty Tax } } & \underline { \text { Insurance } } & \underline { \text { PITI } }\
\$55,000&8\%&30\text {years}&&\$1,005&\$425&
\end{array}$$

Accepted Answer

The answer of Calculate the monthly principal and interest (PI),...

Question 13

Suppose you earn a gross income of $2,730 per month and apply for a mortgage with a monthly PITI of $510.51. You have other financial obligations totaling $431.34 per month. (Use the ratio guidelines from your text) What type of mortgage, if any, would you qualify for?

Accepted Answer

Based on the ratio guidelines commonly used for mortgage qualification, which typically include a front-end ratio (mortgage payment to income) of 28-31% and a back-end ratio (total debt payments to income) of 36-43%, the applicant's financial situation fits within these parameters. The monthly mortgage payment of $510.51 is about 18.7% of the gross income ($2,730), well below the typical front-end ratio limit. Adding the other financial obligations ($431.34) to the mortgage payment for a total of $941.85 results in a back-end ratio of about 34.5%, also within acceptable limits. Therefore, the applicant could qualify for both FHA and conventional mortgages.

Question 14

A mortgage applicant who has a monthly gross income of $4,770 applies for a mortgage with monthly PITI of $1,669.50. The applicant's other financial obligations total $281.43 per month. (Use the ratio guidelines from your text) What type of mortgage, if any, would the applicant qualify for?

Accepted Answer

The answer of A mortgage applicant who has a monthly...

Question 15

Calculate the monthly principal and interest (PI), using Table 14-1 from your text, and the monthly PITI for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
\text { Amount } & \text { Interest } & \text { Term of } & \text { Monthly } & \text { Annual } & \text { Annual } & \text { Monthly } \
\text { Financed } & \text { Rate } & \underline { \text { Loan } } & \underline { \text { PI } } & \underline { \text { Property Tax } } & \underline { \text { Insurance } } & \text { PITI } \
\$ \$ 89,200 & 8 \frac { 1 } { 2 } \% & 20 \text { years } & & \$ 1,626 & \$ 615 &
\end{array}$$

Accepted Answer

The answer of Calculate the monthly principal and interest (PI),...

Question 16

Using Table 14-1 from your text, calculate the required information for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
& & \text { Term } & \# \text { \#of } & & & \
\text { Amount } & \text { Interest } & \text { of } & \$ 1,000 \mathrm {~s} & \text { Table } & \text { Monthly } & \text { Total } \
\text { Financed } & \text { Rate } & \text { Loan } & \text { Financed } & \text { Factor } & \text { Payment } & \text { Interest } \
\$ 200,000 & 6 \frac { 3 } { 4 } \% & 35 \text { years } & & & &
\end{array}$$

Accepted Answer

The answer of Using Table 14-1 from your text, calculate...

Question 17

Using Table 14-1 from your text, calculate the required information for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
& & \text { Term } & \# \text { of } & & & \
\text { Amount } & \text { Interest } & \text { of } & \$ 1,000 \mathrm {~s} & \text { Table } & \text { Monthly } & \text { Total } \
\text { Financed } & \text { Rate } & \text { Loan } & \text { Financed } & \text { Factor } & \text { Payment } & \text { Interest } \
\$ 120,300 & 8 \frac { 1 } { 2 } \% & 40 \text { years } & & & &
\end{array}$$

Accepted Answer

The answer of Using Table 14-1 from your text, calculate...

Question 18

Evelynn has a home that was recently appraised for $127,000, and the balance on the existing mortgage is $88,350. If a bank is willing to loan up to 75% of the appraised value, calculate the potential amount of credit available on a home equity loan.

Accepted Answer

The bank will loan 75% of $127,000, which is $95,250. Subtract the existing mortgage balance of $88,350 from this amount to find the available credit: $95,250 - $88,350 = $6,900.

Question 19

Calculate the monthly principal and interest (PI), using Table 14-1 from your text, and the monthly PITI for the following mortgage, rounding to the nearest cent. $$\begin{array} { l l l l l l l } 
\text { Amount } & \text { Interest } & \text { Term of } & \text { Monthly } & \text { Annual } & \text { Annual } & \text { Monthly } \
\text { Financed } & \text { Rate } & \underline { \text { Loan } } & \underline { \text { PI } } & \underline { \text { Property Tax } } & \underline { \text { Insurance } } & \text { PITI } \
\$30,000& 7 \frac { 1 } { 4 } \% & 25 \text { years } & & \$ 1,418 & \$ 339 &
\end{array}$$

Accepted Answer

The answer of Calculate the monthly principal and interest (PI),...

Question 20

Lucerne earns a gross income of $5,500 per month and applies for a mortgage with a monthly PITI of $1,244. Lucerne has other financial obligations totaling $829 per month. (Use the ratio guidelines from your text) What type of mortgage, if any, would Lucerne qualify for?

Accepted Answer

Lucerne's total debt-to-income ratio is ($1,244 + $829) / $5,500 = 37.6%. FHA loans typically allow a higher debt-to-income ratio, often up to 43%, so Lucerne would qualify for an FHA loan. Conventional loans usually require a lower ratio, often around 36%, which Lucerne exceeds.

Quiz 14: Mortgages

Yara owns a home that was recently appraised for $189,000. The balance on the existing mortgage is $84,450. If Yara's bank is willing to loan up to 75% of the appraised value, find the potential amount of credit available on a home equity loan.

Carlos owns a home that was recently appraised for $132,000. The balance on the existing mortgage is $73,700. If Carlos's bank is willing to loan up to 75% of the appraised value, find the potential amount of credit available on a home equity loan.

Your home was recently appraised for $179,000. The balance on your existing mortgage is $115,050. If your bank is willing to loan up to 70% of the appraised value, what is the potential amount of credit available on a home equity loan?

You bought a home with an adjustable-rate mortgage. The margin on the loan is 4.3% and the rate cap is 5.75% over the life of the loan. If the current index rate is 7.25%, what is the calculated interest rate of the ARM?

Suppose you earn a gross income of $2,730 per month and apply for a mortgage with a monthly PITI of $510.51. You have other financial obligations totaling $431.34 per month. (Use the ratio guidelines from your text) What type of mortgage, if any, would you qualify for?

A mortgage applicant who has a monthly gross income of $4,770 applies for a mortgage with monthly PITI of $1,669.50. The applicant's other financial obligations total $281.43 per month. (Use the ratio guidelines from your text) What type of mortgage, if any, would the applicant qualify for?

Evelynn has a home that was recently appraised for $127,000, and the balance on the existing mortgage is $88,350. If a bank is willing to loan up to 75% of the appraised value, calculate the potential amount of credit available on a home equity loan.

Lucerne earns a gross income of $5,500 per month and applies for a mortgage with a monthly PITI of $1,244. Lucerne has other financial obligations totaling $829 per month. (Use the ratio guidelines from your text) What type of mortgage, if any, would Lucerne qualify for?