FIN 3334- Lender risk mitigation notes (lesson 4)

Federalhousingadministrationfha a

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Unformatted text preview: + TI) / GMI = (723 + 400) / (49,992 / 12) = 1123 / 4166 = 26.96% Total Debt‐Ratio = (PITI + LTO) / GMI = ( 723 + 400 + 300) / 4166 = 34.16% 3. Underwriting Process Now Largely Automated a) FNMA’s Desktop Underwriter b) Able to Be Pre‐Qualified for Loans in 20 Secs (eg, Zillow, LendingTree) Example 1 (cont’d). Given Jenny’s income, what is the largest loan she can obtain if the lender is willing to offer a 30‐year FRM loan at 4.08% as long as her Total Debt Ratio < 45%? Step 1. Solve for Largest Possible Monthly Payment. (GMI x max TDR ) – Taxes – Insurance – Other Debt = max PITI ($4166 x 0.45) ‐ $400 ‐ $300 = $1852 – 700 = $1175 Step 2. Solve for PV using Loan Parameters and Largest Payment N = 360, I = 4.08/12, PV = ?, PMT = 1175, FV = 0 PV = $243,756 B. Government‐Provided Mortgage Insurance (Non‐Conventional Loans) 1. Federal Housing Administration (FHA) a) Founded in 1934 as Part of New Deal to Popularize Long‐Term Amortizing Loans b) Insures: Entire Loss of Privately‐Origi...
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This document was uploaded on 03/20/2014 for the course FIN 3334 at Texas Tech.

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