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FIN 3334- Lender risk mitigation notes (lesson 4)

Jennycurrentlyhasagrossannualincomeof49992andmakesstud

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Unformatted text preview: (Front‐End) = PITI / Gross‐Monthly Income (ii) Total Debt Ratio (Back‐End) = PITI + LTO / Gross Monthly Income (iii) Conforming Previously Required to be less than 28% and 36%, respectively (iv) Response to Crisis: Total Debt “Temporarily” Required to be Less than 45% b) Creditworthiness: Willingness to Repayment (i) Past Repayment History of Debt (ii) Calculate FICO Score using Data from Experian, EquiFax, and TransUnion (iii) Prime Requires FICO >> 660 c) Collateral: Assessment of Severity if Default (i) Done Thru Appraisal (ii) Conforming Requires LTV < 80% Example 1. Jenny currently has a gross annual income of $49,992 and makes student loan payments of $300 per month. She is interested in purchasing a $197,000 house using a $150,000 30‐year FRM loan at 4.08% and $4,000 in origination fees. Calculate the LTV and the two debt‐to‐income ratio’s used to underwrite the loan if she anticipates $800 and $4,000 per year in hazard insurance and property taxes. LTV = 150,000/ 197,000 = 76% Housing Expense Ratio = (PI...
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