module 3.3 Performing affordability calculations Flashcards
What costs are incorp in GDS
mortgage payments (principal and interest) property taxes (if applicable) heating costs, condo fees (if applicable); explained later within the module pad rent (the cost to rent a space on which to locate a mobile home or other manufactured home), if applicable
What is the max allowable GDS
39%
is the full amount of condo fees worked into gds?
NO ONLY HALF
what are a few ways to decrease GDS
decrease housing costs (possibly by increasing down payment or finding a less expensive property), and/or
look for ways to increase income (possibly by adding an additional applicant such as a spouse to increase the gross household income, consider bonuses/overtime etc.)
what is TDS
The total debt-service ratio is an extension of the gross debt-service ratio. TDS is the percentage of an applicant’s gross income that is needed to cover the GDS plus all other monthly debt payments (formally known as liabilities).
9 figures worked into TDS
current housing-related costs (as used in the calculation of GDS) personal loans credit card debt car leases and/or loans support payments or alimony student loans mortgages on other property other debt obligations captured on a credit report; this may include co-signed facilities on for others other court-ordered repayments
what does TDS not include
cell phone cable life insurance policies food clothing investments monthly transit passes monthly parking
All dicretional expenses that can be reduced on the owner if need be
What might not be on the credit report
new” debt (incurred since the report was printed)
debts incurred through creditors that do not report (such as sub-prime auto lease and finance companies)
debts being pursued by collection agencies but not registered yet as collection accounts
What is generally the max TDS
44%
What is generally used to calculate monthly payments of unsecured debt
3% to 5%
what are some ways to mitigate high tds
Decreasing debt level lowers TDS (assuming that housing costs and income remain constant).
Decreasing housing costs lowers TDS (assuming that debt level and income remain constant).
Increasing income lowers TDS (assuming that housing costs and debt level remain constant).
When using the calculator do you enter yearly or monthly for property tax calc
Yearly
Which key to enter GDS and TDS calculations
Shift + debt
which key to enter only tds
debt
which key to enter income
inc
should income be entered annually or monthly on calculator
annually
what are the three questions in remebering monthly payment calculations with insurance
- how much of a mortgage does david want
- will he need mortgage insurance
- what will his payments be
What are the three different ways to get a lower interest rate
Opt for a shorter term length. (Typically, the shorter the term, the lower the interest rate.)
Opt for a variable-rate mortgage rather than a fixed-rate mortgage. (Typically, a fixed interest rate is slightly higher than a variable interest rate for the same term length.)
Opt for a closed term. (Typically, a closed term has a lower interest rate than an open term.)
Should brokerages maintain a separate loan file for each mortgage loan application and what rule states
Yes as per section 105 of the real estate act rules
what is included in a loan file
signed, written consent to access personal information (such as a credit report)
applicant’s credit report
mortgage application file, renewal agreement, etc. (all mortgage instruments)
signed disclosures
applicant personal identity documents
employment and income verification
sources of and proof of down payment
proof of assets, investments, and/or other equity
subject property documents such as offer to purchase, condo documents, copy of title, Real Property Report
insurance application forms, signed waivers, etc.
proof of separation, divorce, child support, etc.
proof of consumer proposal or bankruptcy
proof of dissolution of business or partnership
copies of e-mail communications, meeting notes, and other correspondence pertaining to the transaction
At the end of each mortgage transaction what are you responsible for in regards to documents
turning over all documents, notes, e-mail, etc. to the brokerage for storage and/or maintenance
destroying any copies on your personal computer or other electronic devices in accordance with brokerage policy
