module 3.3 Performing affordability calculations

Question 1

What costs are incorp in GDS

Answer 1

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

Question 2

What is the max allowable GDS

Answer 2

39%

Question 3

is the full amount of condo fees worked into gds?

Answer 3

NO ONLY HALF

Question 4

what are a few ways to decrease GDS

Answer 4

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.)

Question 5

what is TDS

Answer 5

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).

Question 6

9 figures worked into TDS

Answer 6

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

Question 7

what does TDS not include

Answer 7

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

Question 8

What might not be on the credit report

Answer 8

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

Question 9

What is generally the max TDS

Answer 9

44%

Question 10

What is generally used to calculate monthly payments of unsecured debt

Answer 10

3% to 5%

Question 11

what are some ways to mitigate high tds

Answer 11

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).

Question 12

When using the calculator do you enter yearly or monthly for property tax calc

Answer 12

Yearly

Question 13

Which key to enter GDS and TDS calculations

Answer 13

Shift + debt

Question 14

which key to enter only tds

Answer 14

debt

Question 15

which key to enter income

Answer 15

inc

Question 16

should income be entered annually or monthly on calculator

Answer 16

annually

Question 17

what are the three questions in remebering monthly payment calculations with insurance

Answer 17

• how much of a mortgage does david want
• will he need mortgage insurance
• what will his payments be

Question 18

What are the three different ways to get a lower interest rate

Answer 18

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.)

Question 19

Should brokerages maintain a separate loan file for each mortgage loan application and what rule states

Answer 19

Yes as per section 105 of the real estate act rules

Question 20

what is included in a loan file

Answer 20

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

Question 21

At the end of each mortgage transaction what are you responsible for in regards to documents

Answer 21

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