Equations and Math

Question 1

How many days are in a year according to the exam?

Answer 1

Assume a 365-day year unless instructed otherwise.

Question 2

What are discount points based on, the loan amount of purchase price?

Answer 2

Be careful to figure discount points based upon the loan amount and not the purchase price.

Question 3

Loan-to-Value Ratio (LTV)

Answer 3

Loan amount / lesser of purchase price or appraised value

Question 4

Front-End Ratio

Answer 4

PITI / gross monthly income

Question 5

Back-End Ratio

Answer 5

(PITI + all monthly obligations) / gross monthly income

Question 6

Interest-only payments

Answer 6

[Loan amount x interest rate (as a percentage)] / 12

Question 7

Daily interest

Answer 7

[Loan amount x interest rate (as a percentage)] / 365

Question 8

Mortgage insurance payment

Answer 8

[Loan amount x MI factor (as a percentage)] / 12

Question 9

Property Tax payment

Answer 9

[annual taxes OR (assessed value x tax rate)] / 12

Question 10

Home Owner’s Insurance payment

Answer 10

Annual premium / 12

Question 11

Monthly income, paid weekly

Answer 11

[Weekly income x 52] / 12

Question 12

Monthly income, paid bi-weekly

Answer 12

[Bi-weekly income x 26] / 12

Question 13

Monthly income, paid hourly

Answer 13

[Hourly rate x number of hours worked per week x 52] / 12

Question 14

What kind of math problems should you be able to do?

Answer 14

You should be able to complete the following types of problems:

• Daily interest
• Simple amortization
• Down payment
• LTV
• DTI
• Permanent buy-down/discount points
• Closing costs
• ARM adjustments