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The SAFE Mortgage Licensing Act is designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators and for the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a nationwide mortgage licensing system and registry for the residential mortgage industry.

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A property is valued at $850,000. There is a first and a second mortgage with a CLTV of 85%. The second mortgage’s LTV is 22%.

**What is the balance of the first mortgage?****Answer: c)**Both mortgages together constitute a CLTV of 85% ($722,500). If the second mortgage’s LTV is 22%, the first mortgage’s LTV has to be 63% (85 – 22 = 63). When you multiply $850,000 by 63%, the result is $535,500.**Answer: c)**Both mortgages together constitute a CLTV of 85% ($722,500). If the second mortgage’s LTV is 22%, the first mortgage’s LTV has to be 63% (85 – 22 = 63). When you multiply $850,000 by 63%, the result is $535,500. -
A property is valued at $500,000. There is a first and a second mortgage with a CLTV of 60%. The second mortgage’s LTV is 15%.

**What is the balance of the first mortgage?****Answer: c)**Both mortgages together constitute a CLTV of 75% ($300,000). If the second mortgage’s LTV is 15%, the first mortgage’s LTV has to be 45% (60 – 15 = 45). When you multiply $500,000 by 45%, the result is $225,000.**Answer: c)**Both mortgages together constitute a CLTV of 75% ($300,000). If the second mortgage’s LTV is 15%, the first mortgage’s LTV has to be 45% (60 – 15 = 45). When you multiply $500,000 by 45%, the result is $225,000. -
An individual desires to purchase a home for $600,000. He has $60,000 to use as a down payment but desires to avoid PMI.

**By using piggyback financing, how would you structure this purchase?****Answer: c)**To avoid PMI, the first mortgage must be no greater than 80% LTV (480,000). If the borrower has $60,000 (10%) to spend as a down payment, another 10% will be needed to bridge the gap between the first mortgage, the down payment, and the purchase amount.**Answer: c)**To avoid PMI, the first mortgage must be no greater than 80% LTV (480,000). If the borrower has $60,000 (10%) to spend as a down payment, another 10% will be needed to bridge the gap between the first mortgage, the down payment, and the purchase amount. -
An individual desires to purchase a home for $850,000. He has $85,000 to use as a down payment but desires to avoid PMI.

**By using piggyback financing, how would you structure this purchase?****Answer: a)**To avoid PMI, the first mortgage must be no greater than 80% LTV (680,000). If the borrower has $85,000 (10%) to spend as a down payment, another 10% will be needed to bridge the gap between the first mortgage, the down payment, and the purchase amount.**Answer: a)**To avoid PMI, the first mortgage must be no greater than 80% LTV (680,000). If the borrower has $85,000 (10%) to spend as a down payment, another 10% will be needed to bridge the gap between the first mortgage, the down payment, and the purchase amount. -
An applicant earns $22.00 per hour and consistently works a 35-hour work week.

**What is his monthly income?****Answer: d)**The hourly rate of $22.00 is multiplied by the hours worked per week (35) to achieve the weekly rate ($770). The weekly rate is then multiplied by 52 to achieve the annual income since each year contains 52 weeks ($40,040). The annual income is then divided by 12 to achieve the monthly income. $3,336.67.**Answer: d)**The hourly rate of $22.00 is multiplied by the hours worked per week (35) to achieve the weekly rate ($770). The weekly rate is then multiplied by 52 to achieve the annual income since each year contains 52 weeks ($40,040). The annual income is then divided by 12 to achieve the monthly income. $3,336.67. -
An applicant earns $30.00 per hour and consistently works a 45-hour work week.

**What is his monthly income?****Answer: a)**The hourly rate of $30.00 is multiplied by the hours worked per week (45) to achieve the weekly rate ($1,350). The weekly rate is then multiplied by 52 to achieve the annual income since each year contains 52 weeks ($70,200). The annual income is then divided by 12 to achieve the monthly income. $5,850.**Answer: a)**The hourly rate of $30.00 is multiplied by the hours worked per week (45) to achieve the weekly rate ($1,350). The weekly rate is then multiplied by 52 to achieve the annual income since each year contains 52 weeks ($70,200). The annual income is then divided by 12 to achieve the monthly income. $5,850. -
**If a borrower gets a loan with a total debt ratio of 35% and a monthly income of $6,000, how much would be available to cover his P&I payments if he has other monthly debt of $750?****Answer: d)**The established debt ratio of 35% translates to $2,100 meaning that the P&I plus all other monthly debt totals $2,100. If the other monthly debt amounts to $750, the difference of $1,350 is what is left to cover the P&I (2,100 – 750 = 1,350).**Answer: d)**The established debt ratio of 35% translates to $2,100 meaning that the P&I plus all other monthly debt totals $2,100. If the other monthly debt amounts to $750, the difference of $1,350 is what is left to cover the P&I (2,100 – 750 = 1,350). -
**If a borrower gets a loan with a total debt ratio of 30% and a monthly income of $9,000, how much would be available to cover his P&I payments if he has other monthly debt of $2,500?****Answer: b)**The established debt ratio of 30% translates to $2,700 meaning that the P&I plus all other monthly debt totals $2,700. If the other monthly debt amounts to $2,500, the difference of $200 is what is left to cover the P&I (4,200 – 1,500 = 2,700).**Answer: b)**The established debt ratio of 30% translates to $2,700 meaning that the P&I plus all other monthly debt totals $2,700. If the other monthly debt amounts to $2,500, the difference of $200 is what is left to cover the P&I (4,200 – 1,500 = 2,700). -
An applicant earns $12,000 monthly. His monthly debt amounts to $2,200.

**For how much of a PITI can he qualify assuming his maximum allowable back-end ratio is 36%****Answer: c)**Monthly earnings amount to $12,000. All qualifying debt can consume no more than 36% (4,320). If his monthly debt amounts to $2,200, the balance of allowable expense is $2,120 (4,320 – 2,200).**Answer: c)**Monthly earnings amount to $12,000. All qualifying debt can consume no more than 36% (4,320). If his monthly debt amounts to $2,200, the balance of allowable expense is $2,120 (4,320 – 2,200). -
An applicant earns $5,000 monthly. His monthly debt amounts to $950.

**For how much of a PITI can he qualify assuming his maximum allowable back-end ratio is 40%****Answer: d)**Monthly earnings amount to $5,000. All qualifying debt can consume no more than 40% (2,000). If his monthly debt amounts to $950, the balance of allowable expense is $1,050 (2,000 – 950).**Answer: d)**Monthly earnings amount to $5,000. All qualifying debt can consume no more than 40% (2,000). If his monthly debt amounts to $950, the balance of allowable expense is $1,050 (2,000 – 950). -
A borrower’s monthly P&I payment is $2,380. The escrow consists of annual real estate taxes of $7,200, annual homeowner’s insurance of $1,700, and monthly PMI of $150.00.

**What is the monthly PITI payment?****Answer: c)**The real estate taxes and homeowner’s insurance are annual amounts. Adding them together and dividing the sum by 12 results in a monthly equivalency of $370.83 (7,200 + 1,700 = 8,900 / 12 = 741.67). To that, the monthly P&I of $2,380 and the monthly PMI of $150.00 are added resulting in a monthly PITI payment of $3,272.**Answer: c)**The real estate taxes and homeowner’s insurance are annual amounts. Adding them together and dividing the sum by 12 results in a monthly equivalency of $370.83 (7,200 + 1,700 = 8,900 / 12 = 741.67). To that, the monthly P&I of $2,380 and the monthly PMI of $150.00 are added resulting in a monthly PITI payment of $3,272. -
A borrower’s monthly P&I payment is $2,000. The escrow consists of annual real estate taxes of $5,000, annual homeowner’s insurance of $1,200, and monthly PMI of $80.00.

**What is the monthly PITI payment?****Answer: d)**The real estate taxes and homeowner’s insurance are annual amounts. Adding them together and dividing the sum by 12 results in a monthly equivalency of $370.83 (5,000 + 1,200 = 6,200 / 12 = 516.67). To that, the monthly P&I of $2,000 and the monthly PMI of $80.00 are added resulting in a monthly PITI payment of $2,596.67.**Answer: d)**The real estate taxes and homeowner’s insurance are annual amounts. Adding them together and dividing the sum by 12 results in a monthly equivalency of $370.83 (5,000 + 1,200 = 6,200 / 12 = 516.67). To that, the monthly P&I of $2,000 and the monthly PMI of $80.00 are added resulting in a monthly PITI payment of $2,596.67. -
An applicant earns $3,400 bi-weekly.

**What is her monthly income?****Answer: a)**Bi-weekly pay periods amount to 26 payments in a calendar year. 3,400 x 26 = an annual income of $88,400. An annual income of $88,400 amounts to a monthly income of $7,367 (88,400 / 12).**Answer: a)**Bi-weekly pay periods amount to 26 payments in a calendar year. 3,400 x 26 = an annual income of $88,400. An annual income of $88,400 amounts to a monthly income of $7,367 (88,400 / 12). -
A property is valued at $830,000. There is a first mortgage of $350,000 along with a HELOC. The HELOC has a line amount of $170,000 with an outstanding balance of $70,000.

**What is the LTV, CLTV, and TLTV?****Answer: a)**The first mortgage (350,000) in relation to the property value (830,000) results in a 42% LTV. All outstanding debt (350,000 + 70,000) in relation to the property value results in a 51% CLTV. All outstanding encumbrances (350,000 + 170,000) in relation to the property value results in a TLTV of 63%.**Answer: a)**The first mortgage (350,000) in relation to the property value (830,000) results in a 42% LTV. All outstanding debt (350,000 + 70,000) in relation to the property value results in a 51% CLTV. All outstanding encumbrances (350,000 + 170,000) in relation to the property value results in a TLTV of 63%. -
An applicant has earned a base salary of $113,000 for the previous five years. With overtime, his previous year’s earnings were $131,200. The year before that he grossed $126,400.

**What is the amount for monthly overtime that you credit on the application?****Answer: a)**By averaging the previous two years’ gross earnings (131,200 + 126,400 / 2), the average annual gross earnings amount to $128,800. By subtracting his base salary of $113,500 from his annual average gross earnings, the annual average overtime earned is $15,800 with a corresponding monthly equivalence of $1,317.**Answer: a)**By averaging the previous two years’ gross earnings (131,200 + 126,400 / 2), the average annual gross earnings amount to $128,800. By subtracting his base salary of $113,500 from his annual average gross earnings, the annual average overtime earned is $15,800 with a corresponding monthly equivalence of $1,317. -
Bo Buyer has 9% to put down. He wishes to avoid PMI by pursuing piggyback financing.

**The scenario for which he decided is:****Answer: b)**When structuring a piggyback loan scenario, the first number always represents the LTV of the primary mortgage. Since the primary goal is to avoid paying PMI, that loan must be at or below 80%. The second number represents the LTV of the second mortgage and the third represents the borrower’s down payment (9%). All three numbers must add up to 100% since LTV + equity must always equal 100%.**Answer: b)**When structuring a piggyback loan scenario, the first number always represents the LTV of the primary mortgage. Since the primary goal is to avoid paying PMI, that loan must be at or below 80%. The second number represents the LTV of the second mortgage and the third represents the borrower’s down payment (9%). All three numbers must add up to 100% since LTV + equity must always equal 100%. -
**If a 5/1 ARM contains a cap structure of 5/2/5 and a start rate of 2.5%, to what rate would the borrower’s interest rate increase if, at the first adjustment period, the index becomes 4 with a margin of 5?****Answer: a)**Without a cap, the borrower’s rate would increase from 2.5% to 9% (index + margin = fully indexed accrual rate[ FIAR]). Since the loan contains a 5% initial adjustment cap, however, the highest that the borrower’s rate could increase would be to 7.5%.**Answer: a)**Without a cap, the borrower’s rate would increase from 2.5% to 9% (index + margin = fully indexed accrual rate[ FIAR]). Since the loan contains a 5% initial adjustment cap, however, the highest that the borrower’s rate could increase would be to 7.5%. -
Miss Morgan wants to secure a $575,000 loan at a 15-year fixed-rate of 2.375%. Par pricing is at 3.25%. In order to reach the rate of 2.375%, Mike Mortgage Man would have to charge Miss Morgan one and a half points.

**How much would Miss Morgan have to pay to secure a rate of 2.375%?****Answer: d)**One point equals one percent of the loan amount. Since the cost of the rate that Miss Morgan desires is 1.5% in points, the loan amount (575,000) multiplied by 1.5% results in a points expense of $8,625.**Answer: d)**One point equals one percent of the loan amount. Since the cost of the rate that Miss Morgan desires is 1.5% in points, the loan amount (575,000) multiplied by 1.5% results in a points expense of $8,625. -
Helena is a 30-year old mansion buyer. In order to close on the purchase of her new estate, she will need to bring $657,500 to the settlement table. Her only asset from which she intends to secure this money is her IRA account bearing a face value of $755,000.

**Assuming that all other underwriting conditions have been satisfied, will Helena be able to close on her loan?****Answer: d)**Investor criteria maintains that, if a borrower intends to use retirement funds as a source of settlement funds and is younger than 59 ½ (the typical age of retirement), unless the amount contained in any one specific retirement account equates to or exceeds 20% of the total amount of cash needed to close, the value of each retirement account must be considered at 70% of its face value. Since Helena is younger than 59 ½ and, since the face value of her retirement account is less than 20% above the total amount of money needed to settle, the value of her retirement account may only be considered $528,500 (755,000 x 70%). Helena will need to document an additional $129,000 in order to close.**Answer: d)**Investor criteria maintains that, if a borrower intends to use retirement funds as a source of settlement funds and is younger than 59 ½ (the typical age of retirement), unless the amount contained in any one specific retirement account equates to or exceeds 20% of the total amount of cash needed to close, the value of each retirement account must be considered at 70% of its face value. Since Helena is younger than 59 ½ and, since the face value of her retirement account is less than 20% above the total amount of money needed to settle, the value of her retirement account may only be considered $528,500 (755,000 x 70%). Helena will need to document an additional $129,000 in order to close. -
**If a property is worth $300,000 and the borrower has a first mortgage of $100,000 and a second mortgage of $75,000, what is the LTV and CLTV?****Answer: b)**The first mortgage of $100,000 divided by the property value of $300,000 results in an LTV of 33%. By adding the two debts ($100,000 + $75,000) and dividing their sum total ($175,000) by the property value ($300,000), the resulting CLTV is 58%.**Answer: b)**The first mortgage of $100,000 divided by the property value of $300,000 results in an LTV of 33%. By adding the two debts ($100,000 + $75,000) and dividing their sum total ($175,000) by the property value ($300,000), the resulting CLTV is 58%. -
**If two loans together achieve an 83% CLTV and the first loan is at 60% LTV, what is the LTV of the second loan?****Answer: a)**If the two loans together comprise 83% of the property’s value and the LTV of the second loan is 60%, the second loan must equate to a 23% LTV (83 – 60 = 23).**Answer: a)**If the two loans together comprise 83% of the property’s value and the LTV of the second loan is 60%, the second loan must equate to a 23% LTV (83 – 60 = 23). -
An ARM is currently at 4.5% and set to adjust. The index is currently at 2.5% and the margin has been established at 5.5%.

**To what will the borrower’s interest rate adjust?****Answer: a)**Index plus margin equals Fully Indexed Accrual Rate (FIAR). Consequently, the sum of the adjusted index of 2.5% plus the established margin of 5.5% equals the new interest rate of 8%.**Answer: a)**Index plus margin equals Fully Indexed Accrual Rate (FIAR). Consequently, the sum of the adjusted index of 2.5% plus the established margin of 5.5% equals the new interest rate of 8%. -
A borrower purchased a home for $150,000 and their LTV will be 80%. They paid $2,400 in discount points.

**How many points did they pay?****Answer: d)**If the purchase price is $150,000, the loan amount, at 80% LTV, would be $120,000. Points are calculated based on the loan amount and the borrowers paid $2,400 for them. Since one point on this loan amount equates to $1,200 (.01 x 120,000) and the borrowers spent $2,400, the $2,400 equates to 2 points (2,400 /1,200).**Answer: d)**If the purchase price is $150,000, the loan amount, at 80% LTV, would be $120,000. Points are calculated based on the loan amount and the borrowers paid $2,400 for them. Since one point on this loan amount equates to $1,200 (.01 x 120,000) and the borrowers spent $2,400, the $2,400 equates to 2 points (2,400 /1,200). -
A buyer purchases a home for which the seller pledges to fund a 2-1 buydown. The buyer’s note rate results in a payment of $3,600.

**If the 2-1 buydown would have the buyer remitting a P&I payment of $3,225 for year one and $3,321 for year two, how much did the 2-1 buydown cost the seller?****Answer: c)**If the buyer remits $3,225 for the first year, he is saving $375 monthly over his note rate (3,600 – 3,225). If the buyer remits $3,321 for the second year, he is saving $279 monthly during the second year (3,600 – 3,321). When 12 payments of $375 ($4,500) are added to twelve payments of $279 ($3,348) the seller will spend $7,848 to fund the 2-1 buydown.**Answer: c)**If the buyer remits $3,225 for the first year, he is saving $375 monthly over his note rate (3,600 – 3,225). If the buyer remits $3,321 for the second year, he is saving $279 monthly during the second year (3,600 – 3,321). When 12 payments of $375 ($4,500) are added to twelve payments of $279 ($3,348) the seller will spend $7,848 to fund the 2-1 buydown. -
**If a buyer decides to buy a home for $350,000, put 10% down, and pay 2.5 in discount points, how much money will he spend on points?****Answer: a)**If the purchase price is $350,000 and the buyer puts 10% down, his loan amount will be $315,000. If he purchases 2.5% in discount points, those points will cost him $7,875 (315,000 x 2.5%).**Answer: a)**If the purchase price is $350,000 and the buyer puts 10% down, his loan amount will be $315,000. If he purchases 2.5% in discount points, those points will cost him $7,875 (315,000 x 2.5%). -
If a buyer refinances his loan, his monthly P&I will drop by $1,750 to $10,250. If his monthly real estate taxes are $1,250, his monthly homeowner’s insurance is $600, and his income is $720,000 annually.

**What was his previous housing expense?****Answer: a)**Prior to refinancing, the borrower’s P&I was $12,000. With his monthly taxes being $1,250 and his monthly insurance $600, he was spending $1,850 per month. With an annual salary of $720,000, the monthly equivalency of which is $60,000, his previous housing expense was 23% (13,850/60,000).**Answer: a)**Prior to refinancing, the borrower’s P&I was $12,000. With his monthly taxes being $1,250 and his monthly insurance $600, he was spending $1,850 per month. With an annual salary of $720,000, the monthly equivalency of which is $60,000, his previous housing expense was 23% (13,850/60,000). -
**If a borrower chooses an above-par interest rate that results in a closing cost credit of 3%, how much would her settlement costs be reduced assuming a purchase price of $340,000 and a down payment of 20%?****Answer: c)**With a 20% down payment, the loan amount will be $272,000. If the rate generates a 3% settlement cost credit, the borrower will receive $8,160 towards her closing costs (272,000 x 3%).**Answer: c)**With a 20% down payment, the loan amount will be $272,000. If the rate generates a 3% settlement cost credit, the borrower will receive $8,160 towards her closing costs (272,000 x 3%). -
A buyer buys a home for $595,000 and puts 30% down.

**What is the amount of his down payment?****Answer: c)**Thirty percent of a $595,000 sales price equates to $178,500 (595,000 x 30%).**Answer: c)**Thirty percent of a $595,000 sales price equates to $178,500 (595,000 x 30%). -
A buyer’s loan amount is $140,000 on a $300,000 purchase price.

**How much was her down payment and what percent of the purchase price was it?****Answer: d)**Purchase price of $300,000 minus her loan amount of $140,000 equals a $160,000 down payment. Down payment of $160,000 divided by the $300,000 purchase price equals a 53% down payment (160,000/300,000).**Answer: d)**Purchase price of $300,000 minus her loan amount of $140,000 equals a $160,000 down payment. Down payment of $160,000 divided by the $300,000 purchase price equals a 53% down payment (160,000/300,000). -
A buyer wishes to purchase a home for $620,000 and has $60,000 for a down payment. He wishes to avoid paying PMI.

**What is the easiest way to structure this transaction using piggyback financing?****Answer: d)**The $496,000 first mortgage brings the borrower to an 80% LTV negating the need for PMI. Since he only has a $60,000 down payment, a second mortgage of $64,000 will be necessary to bridge the gap.**Answer: d)**The $496,000 first mortgage brings the borrower to an 80% LTV negating the need for PMI. Since he only has a $60,000 down payment, a second mortgage of $64,000 will be necessary to bridge the gap. -
A purchase price is $750,000 and the buyer wishes to apply $75,000 as a down payment. The seller is offering a 2% seller’s concession.

**What is the value of the seller’s concessions?****Answer: d)**Seller’s concessions are based upon the purchase price. Since the purchase price is $750,000 and the seller is offering 2% in concessions, the seller’s concession will amount to $15,000.**Answer: d)**Seller’s concessions are based upon the purchase price. Since the purchase price is $750,000 and the seller is offering 2% in concessions, the seller’s concession will amount to $15,000. -
**If a borrower’s income is $5,000 per month, his back-end DTI is 25%, and his monthly, non-housing related expenses amount to $1,200, what is the total of his housing expense?****Answer: b)**If the sum total of all expenses (back-end ratio) equates to 25% of the borrower’s $5,000 gross monthly income (5,000 x .25 = $1,250) and, of that, $1,200 is monthly expenses, his housing expense would consume the difference of $50.**Answer: b)**If the sum total of all expenses (back-end ratio) equates to 25% of the borrower’s $5,000 gross monthly income (5,000 x .25 = $1,250) and, of that, $1,200 is monthly expenses, his housing expense would consume the difference of $50. -
A borrower is buying a home for $220,000 and has $30,000 to put down on a conventional mortgage. The home appraises for $248,000.

**Will she need to pay PMI?****Answer: a)**A purchase loan’s LTV Is calculated by dividing the loan’s principal balance by the lesser of the purchase price or appraised value. Even though the home appraised higher than the purchase price, the purchase price will be the basis for calculating the LTV. The homeowner will most likely be unable to access the equity difference for one full year.**Answer: a)**A purchase loan’s LTV Is calculated by dividing the loan’s principal balance by the lesser of the purchase price or appraised value. Even though the home appraised higher than the purchase price, the purchase price will be the basis for calculating the LTV. The homeowner will most likely be unable to access the equity difference for one full year. -
**If a customer’s annual income is $96,000 and his housing expense is $3,100, what is his housing expense ratio?****Answer: d)**An annual income of $96,000 translates to a monthly equivalency of $8,000. The housing expense of $3,100 divided by the monthly income of $8,000 results in a housing expense ratio of 39%.**Answer: d)**An annual income of $96,000 translates to a monthly equivalency of $8,000. The housing expense of $3,100 divided by the monthly income of $8,000 results in a housing expense ratio of 39%. -
A home’s purchase price is $142,000 but the property appraises for $175,000. The customer applies for a $110,000 mortgage.

**What is his LTV?****Answer: a)**LTV consists of the loan amount divided by the lesser of the purchase price or appraised value. Since the purchase price is lower than the appraised value, the 77% LTV Is determined by dividing the loan amount of $110,000 by the purchase price of $142,000.**Answer: a)**LTV consists of the loan amount divided by the lesser of the purchase price or appraised value. Since the purchase price is lower than the appraised value, the 77% LTV Is determined by dividing the loan amount of $110,000 by the purchase price of $142,000. -
A borrower desires to purchase a home costing $435,000 and put down 30%.

**What would his loan amount be?****Answer: d**If a borrower makes a 30% down payment, his loan amount would be 70% of the purchase price. $435,000 x 70% = $304,500.**Answer: d**If a borrower makes a 30% down payment, his loan amount would be 70% of the purchase price. $435,000 x 70% = $304,500. -
**If a borrower’s total expense ratio is 40%, her gross monthly income is $11,000, and the housing expense amounts to $1,275, how much is her remaining expense?****Answer: b)**All expenses consume 40% of the borrower’s gross monthly income. If the income is $11,000, 40% of that equates to $4,400. If the housing expense consumes $1,275 of the $4,400, the remaining $3,125 is the amount constituting her remaining expense.**Answer: b)**All expenses consume 40% of the borrower’s gross monthly income. If the income is $11,000, 40% of that equates to $4,400. If the housing expense consumes $1,275 of the $4,400, the remaining $3,125 is the amount constituting her remaining expense. -
PMI is required with an LTV of above 80%. A mortgage closes at a balance of $358,000 along with a home equity line of credit possessing a credit limit of $42,000 and an outstanding balance of $21,000. The mortgage is a 15-year note at a fixed rate of 5.5%. The property appraised for $448,000.

**Which of the following statements is correct?****Answer: a)**With a mortgage balance of $358,000 and an appraised value of $448,000, the LTV is 79%. Since PMI would only be required if the LTV was higher than 80%, PMI is not required.**Answer: a)**With a mortgage balance of $358,000 and an appraised value of $448,000, the LTV is 79%. Since PMI would only be required if the LTV was higher than 80%, PMI is not required. -
An applicant works as a masseuse earning $33.00 per hour. She works a 45-hour work week and gets paid bi-weekly.

**What is her gross bi-weekly pay?****Answer: d)**The hourly rate of $33 is multiplied by 45 to calculate the weekly rate of $1,485. The weekly rate of $1,485 is multiplied by 52 to calculate the annual rate of $77,220. The annual rate of $77,220 is divided by 26 to calculate the bi-weekly rate of $2,970.**Answer: d)**The hourly rate of $33 is multiplied by 45 to calculate the weekly rate of $1,485. The weekly rate of $1,485 is multiplied by 52 to calculate the annual rate of $77,220. The annual rate of $77,220 is divided by 26 to calculate the bi-weekly rate of $2,970. -
**If a police officer is paid $3,800 semi-monthly, what is his monthly income?****Answer: c)**The semi-monthly income may either be multiplied by 24 to calculate the annual income and then divided by 12 to secure the monthly equivalency or simply multiplied by two.**Answer: c)**The semi-monthly income may either be multiplied by 24 to calculate the annual income and then divided by 12 to secure the monthly equivalency or simply multiplied by two. -
A secretary earns an annual salary of $55,000 by working a 40-hour work week with a 1 hour unpaid lunch period each day.

**What is her hourly rate of pay?****Answer: c)**If the secretary earns $55,000 annually, this translates to $1,057.69 weekly (55,000 / 52). The weekly rate of $1057.69is then divided by 35 (since each day includes a 1hour unpaid lunch break) to calculate his hourly rate of $30.22.**Answer: c)**If the secretary earns $55,000 annually, this translates to $1,057.69 weekly (55,000 / 52). The weekly rate of $1057.69is then divided by 35 (since each day includes a 1hour unpaid lunch break) to calculate his hourly rate of $30.22. -
**If a mortgage balance is $315,000 and there is a home equity line of credit in a subordinate lien position possessing a line amount of $64,000 and an outstanding balance of $0.00, what is the CLTV if the home is worth $575,000?****Answer: b)**The CLTV constitutes all outstanding debt in relation to the appraised value. Since the line of credit does not have an outstanding balance, the LTV of 55% is the same as the CLTV (315,000 + 0 = 315,000 / 575,000).**Answer: b)**The CLTV constitutes all outstanding debt in relation to the appraised value. Since the line of credit does not have an outstanding balance, the LTV of 55% is the same as the CLTV (315,000 + 0 = 315,000 / 575,000). -
**If a home is worth $415,000 and contains two loans, the CLTV of which equates to 86%, what is the balance of the second mortgage if the LTV of the first one is 62%?****Answer: c)**If the two mortgages equate to a 86% CLTV of the $415,000 value and the first mortgage constitutes 62% of that, it stands to reason that the second mortgage constitutes 24% (86 – 62). Multiplying the $415,000 value by 24% concludes the second mortgage balance as $99,600.**Answer: c)**If the two mortgages equate to a 86% CLTV of the $415,000 value and the first mortgage constitutes 62% of that, it stands to reason that the second mortgage constitutes 24% (86 – 62). Multiplying the $415,000 value by 24% concludes the second mortgage balance as $99,600. -
A fire fighter is paid $1,600 bi-weekly. The previous year she earned a gross income of $53,000 and the year before that $47,000. She attributes the difference to overtime with a strong likelihood of continuance.

**With what monthly income do you credit her?****Answer: d)**Since the overtime has been increasing and is likely to continue, you may count it as part of the fire fighter’s annual income. The two years’ gross earnings are averaged together to derive an annual average income of $50,000, the monthly equivalency of which is $4,166.67. The base salary is $3,466.67 monthly (1,600 x 26 / 12) and the average monthly overtime is $700 (4,166.67 – 3,466.67). The base monthly income of $3,466.67 plus the monthly overtime of $700 equates to her gross monthly income of $4,166.67.**Answer: d)**Since the overtime has been increasing and is likely to continue, you may count it as part of the fire fighter’s annual income. The two years’ gross earnings are averaged together to derive an annual average income of $50,000, the monthly equivalency of which is $4,166.67. The base salary is $3,466.67 monthly (1,600 x 26 / 12) and the average monthly overtime is $700 (4,166.67 – 3,466.67). The base monthly income of $3,466.67 plus the monthly overtime of $700 equates to her gross monthly income of $4,166.67. -
A property is valued at $475,000. There is a first and a second mortgage with a 55% CLTV. The second mortgage has a 10% LTV.

**What is the balance of the first mortgage?****Answer: d)**If both mortgages together constitute 55% of the property value with the second mortgage constituting 10%, the first mortgage must constitute 45%. When the $475,000 value is multiplied by 45%, the result is $213,750.**Answer: d)**If both mortgages together constitute 55% of the property value with the second mortgage constituting 10%, the first mortgage must constitute 45%. When the $475,000 value is multiplied by 45%, the result is $213,750. -
A conventional mortgage balance is $295,000 and pays off on the tenth calendar day of the month.

**Assuming that the current month’s payment was credited on the fifth and the loan carries a per diem of $17.50, what is the final payoff?****Answer: c)**If the balance owed on the first of the month is $295,000 and the loan pays off five days later, five additional days of interest are due. Since $17.50 x 5 = $87.50, $295,000 + $87.50 = $295,087.50.**Answer: c)**If the balance owed on the first of the month is $295,000 and the loan pays off five days later, five additional days of interest are due. Since $17.50 x 5 = $87.50, $295,000 + $87.50 = $295,087.50. -
An applicant earns $1,200 per month in social security disability. This income is untaxed.

**With what amount do you credit her?****Answer: c)**If the social security disability income is untaxed, you may increase the amount earned by 25%.**Answer: c)**If the social security disability income is untaxed, you may increase the amount earned by 25%. -
An ARM is at the start rate of 3.75%. The index is currently 1.5% and the margin is 3.5%. The caps are 2/6 and the interest rate is at its first adjustment period.

**To what rate does the interest rate adjust?****Answer: c)**With the index at 1.5% and the margin at 3.5%, the FIAR is 5.0%. The 2% periodic rate cap would prevent the rate from increasing by more than 2%. Since 5.0% is less than 2% above the current rate of 3.75%, the rate adjusts from 3.75% to 5.0%.**Answer: c)**With the index at 1.5% and the margin at 3.5%, the FIAR is 5.0%. The 2% periodic rate cap would prevent the rate from increasing by more than 2%. Since 5.0% is less than 2% above the current rate of 3.75%, the rate adjusts from 3.75% to 5.0%. -
A crossing guard earns an annual salary of $46,500 working a 39.5-hour work week.

**What is her hourly rate of pay?****Answer: d)**$46,500 annually translates to $894,23 weekly (46,500 / 52). This weekly rate translates to an hourly rate of $22.64 based on a 39.5-hour work week (894.23 / 39.5).**Answer: d)**$46,500 annually translates to $894,23 weekly (46,500 / 52). This weekly rate translates to an hourly rate of $22.64 based on a 39.5-hour work week (894.23 / 39.5). -
A borrower purchased a home for $260,000 and their LTV will be 70%. They paid $5,460 in discount points.

**How many points did they pay?****Answer: d)**If the purchase price is $260,000, the loan amount, at 70% LTV, would be $182,000. Points are calculated based on the loan amount and the borrowers paid $5,460 for them. Since one point on this loan amount equates to $1,820 (.01 x 182,000) and the borrowers spent $5,460, the $5,460 equates to 3 points (5,460 / 1,820).**Answer: d)**If the purchase price is $260,000, the loan amount, at 70% LTV, would be $182,000. Points are calculated based on the loan amount and the borrowers paid $5,460 for them. Since one point on this loan amount equates to $1,820 (.01 x 182,000) and the borrowers spent $5,460, the $5,460 equates to 3 points (5,460 / 1,820). -
Bushley the Buyer has 11% to put down. He wishes to avoid PMI by pursuing piggyback financing.

**The scenario for which he decided is:****Answer: b)**When structuring a piggyback loan scenario, the first number always represents the LTV of the primary mortgage. Since the primary goal is to avoid paying PMI, that loan must be at or below 80%. The second number represents the LTV of the second mortgage and the third represents the borrower’s down payment (11%). All three numbers must add up to 100% since LTV + equity must always equal 100%.**Answer: b)**When structuring a piggyback loan scenario, the first number always represents the LTV of the primary mortgage. Since the primary goal is to avoid paying PMI, that loan must be at or below 80%. The second number represents the LTV of the second mortgage and the third represents the borrower’s down payment (11%). All three numbers must add up to 100% since LTV + equity must always equal 100%.

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