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Unformatted text preview: ting standards. Figure 13-1: Conventional Qualifying Ratios 95% LTV 90% LTV 80% LTV Adjustable
13-24 Ratios should not exceed: 26/33 28/36 32/38 26/36 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 13: QUALIFYING THE BORROWER Figure 13-2: Conventional Loans: Calculating the maximum loan amount from gross income Example: 3500 x 36% $1260 – 200 $1060 Taxes and insurance/HOA – 150 Total principal and interest $910 Payment factor for 8.0% interest Divide by / 7.337646 rate for 30 years (see figure 13–2) Loan amount $124,017 (round down to $124,000) Note: To calculate the sales price the borrow may borrower, divide the loan amount by the LTV. Maximum purchase price: $124,017 / 0.90 = $137,797.00 Note: Conventional loans quality with a front–end ratio, too. Be sure to take this into account during your final calculations. Gross income Back–end ratio Total available for debt service Monthly installment debts Example: Total allowable housing expenses Divide by gross income Front end ratio $910 Divide by 3500 26% This 26% is within the guideline for a FNMA 90% LTV. Dynasty School (www.dynastySchool.com) 13-25 REAL ESTATE FINANCE QUALIFYING UNDER GOVERNMENT–BACKED LOANS GUIDELINES
FHA QUALIFYING RATIOS AND CALCULATING MAXIMUM LOAN AMOUNT FROM GROSS INCOME
The FHA uses the same qualifying procedure as conventional lenders. FHA states that the front–end ratio should not exceed 29%, while the back–end ratio–the more important of the two qualifying tests– should not exceed 41%, including MMI.
The FHA ratios are higher due to inclusion of MMI in the monthly payments. The discussion here is limited to the loan broker Federal Housing Administration (FHA) forms needed for calculating the maximum loan amount and the borrower's loan qualification information. The first step for the mortgage loan broker is to calculate the maximum loan amount from the gross income, with an example shown in Figure 13–3, next page. When the form is followed step by step the result will...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10