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Qualifying for a Home loan
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Using the 28/36 ratio, determine the maximum allowable recurring debt for someone with a monthly income of $3,200.
a.
$256
b.
$512
c.
$640
d.
$896
A
You work for a lender that requires a 15% down payment and uses the standard debt-to-income ratio to determine a person?s eligibility for a home loan. Of the following, choose the person that you would rate the highest on their eligibility for a home loan.
Person A
Person B
Person C
Person D
home value
$95,000
$107,000
$120,000
$128,000
income
$46,000
$53,000
$58,000
$60,000
savings
$20,000
$13,910
$18,000
$19,200
recurring debt
$310
$198
$265
$400
a.
Person A
b.
Person B
c.
Person C
d.
Person D
C
Krista and Nick put a down payment of 20% on the purchase of their house, and then financed $200,000. What was the purchase price of the house?
a.
$160,000
b.
$220,000
c.
$240,000
d.
$250,000
D
Using the standard 28/36 guidelines, what is the maximum mortgage payment allowed for someone with an annual salary of $60,750?
a.
$1,215.00
b.
$1,417.50
c.
$1,701.00
d.
$1,822.50
B
Rollin and Sandra want to buy a home priced at $265,000. They plan to finance this amount less the down payment required. Rollin and Sandra have a combined annual income of $83,600 and have saved $53,000. They have a recurring debt of $582. Use a 20% down payment and the 28/36 ratio to determine if Rollin and Sandra are eligible for a loan. What would you advise them to do if they are not eligible?
Rollin and Sandra will not be eligible for a loan. Since 20% of $265,000 is $53,000, they have the required down payment.The recurring debt they have exceeds the allowable amount of $557. Rollin and Sandra should work on reducing their recurring debt.
Mr. and Mrs. Yeager want to buy a home valued at $320,000. If they have 15% of this amount saved for a down payment, how much have they saved?
(Queue AOT theme song)
a.
$480
b.
$4,080
c.
$4,800
d.
$48,000
D
List 4 factors a lending institution might use when determining your eligibility for a home loan.
income, savings, expenses, debt
Mandy has an annual salary of $37,580. Each month she has a car payment of $265 and a student loan of $120. If she applies for a home loan, how likely is it Mandy will be approved based on her debt-to-income ratio?
a.
Very likely; recurring debt is less than what is allowed.
b.
Somewhat likely; recurring debt is equal to what is allowed.
c.
Not likely; recurring debt is higher than what is allowed.
d.
There is not enough information given to determine the answer.
C
How much annual income would you need to have if, using the 28/36 ratio, your maximum allowable recurring debt is $500?
a.
$21,430
b.
$30,000
c.
$62,500
d.
$75,000
D
Why is it important to a lending institution that a person present a 2-year job history when applying for a home loan?
a.
Most lending institutions have quotas for giving loans to people with certain careers.
b.
A job history helps the lender to get to know the people they are lending money to instead of lending to a complete stranger.
c.
Lending institutions have a high employee turnover rate and are always looking for new employees.
d.
It is important to present job history when applying for a loan because a bank or lender needs assurance of payment.
D
Why is a larger down payment beneficial to a home investor?
a.
A larger down payment would only be beneficial to an investor if they intended on renting out the house.
b.
A larger down payment would enable an investor to get a loan with a higher interest rate and lower monthly payments.
c.
A larger down payment would enable an investor to get a loan with a lower interest rate and lower monthly payments.
d.
A larger down payment is essentially a larger bribe to the lending institution and gets the investor in their good favor.
C
Mr. and Mrs. Donahue want to buy a home valued at $365,000. If they have 21.5% of this amount saved for a down payment, how much will their home loan be?
a.
$78,475
b.
$286,525
c.
$341,275
d.
$357,153
B
Which of the following ratios is used to determine ones debt-to-income ratio?
a.
20/28
b.
20/36
c.
28/30
d.
28/36
D
A couple is required by their lender to have a down payment of 20% of the purchase price of the home they want to buy. If the couple has saved $35,000, what is the most expensive home the couple can afford to buy?
a.
$63,000
b.
$140,000
c.
$175,000
d.
$210,000
C
Using the standard 28/36 guidelines, if the maximum monthly mortgage payment allowed for someone applying for a home loan is $1,085, what is their annual income?
a.
$36,167
b.
$46,500
c.
$65,100
d.
$162,750
B
Luis wants to buy a home priced at $315,000. He plans to finance this amount less the down payment required. His mortgage payment would then be $2100. Luis has an annual income of $91,500 and $65,000 in savings. Luis has a car payment of $370, a student loan payment of $165 and a credit card payment of $45. Use a 20% down payment and the 28/36 ratio to determine if Luis is eligible for a loan. What would you advise him to do if he is not eligible?
a.
Luis is eligible for a home loan; he meets all of the requirements.
b.
Luis is not eligible for a home loan; he should continue to save for a down payment.
c.
Luis is not eligible for a loan; he should look for a cheaper house.
d.
Luis is not eligible for a loan; he should reduce his recurring debt.
A
You work for a lending institution and are tasked with whether or not to approve a home loan. All applicants are required to have a 20% down payment, and the standard 28/36 ratio is used
The loan application is for $230,000. You see that the applicant has an annual salary of $83,000 and a savings account balance of $50,000. The applicant also has a car payment of $315, a student loan of $140 and a boat loan of $96.
How likely are you to approve the loan?
a.
Very likely; recurring debt is considerably less than what is allowed.
b.
Somewhat likely; recurring debt is very close to what is allowed.
c.
Not likely; recurring debt is higher than what is allowed.
d.
There is not enough information given to determine the answer.
B
Using the 28/36 ratio, determine the maximum allowable recurring debt for someone with an annual income of $86,250.
a.
$575.00
b.
$2,012.50
c.
$2,415.00
d.
$2,587.50
A
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