Chapter 12 - Underwriting and Borrower Qualification

Question 1

what are 5 C’s of Credit

Answer 1

Character, Capital, Capacity, Credit, Collateral

Question 2

2 underwriting objectives

Answer 2

1. borrower has financial ability to honor contract
2. property will be sufficient value to cover OSB

Question 3

credit analysis

Answer 3

ability to meet the terms of a mortgage and amount of their income available for future mortgage payments

Question 4

lending value

Answer 4

a long-term conservative estimate of the value of the property pledged as a security for a loan

Question 5

formula: maximum loan =

Answer 5

LTV ratio x lending value

Question 6

Gross Debit Service Ratio formula

Answer 6

Principal + Interest + property Taxes / Gross Income
P+I+T / GI or GI=P+I+T / GDSR or P+I= (GDSRxGI) - T

Question 7

Total Debt Service Ratio formula (ie 40%)

Answer 7

(P+I+T+other payments / GI

Question 8

maximum LTV

Answer 8

80-95% up to 1M, max refi = 80%