FIN 3334- Lender risk mitigation notes (lesson 4)


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Unformatted text preview: ts towards an auto loan. He would like a buy a house, but unsure how large of loan he could qualify for. What is the maximum size of loan Mr. Smith could qualify for if lenders require a total‐debt ratio less than or equal to 45% to originate a 30‐year FRM loan at 6% with 1 point? 2. You have been offered a $535,000 30‐year FRM loan at 5.28% with 2 points of originations fees to purchase a $600,000 house, but the lender requires you to pay $400 per month in PMI until the LTV is less than 80%. What is the APR and EBC of the loan if you plan to prepay after 7 years? What is the incremental cost of the $55,000 if the lender is willing to offer the same loan terms if the balance was $480,000 with no PMI? 3. You have been offered a $500k 7/1 Hybrid ARM Loan with 1pt in origination fees, teaser of 4.8%, margin of 289bp, and future composite rates indexed to LIBOR, which was 3.24% at the time of origination. What is the APR of this loan with and without 100bp periodic cap? 4. What is the main difference between Yield Main...
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