Tuesday, June 16, 2009

Student Question: Qualifying the Buyer

Answer to student question (below):

Let me know if you had any technical difficulties viewing this video. One student has so far but I checked it and it seems to be ok.

The answer to Qualifying the Buyer Problem 1 is on the bottom of the course homepage and pasted below. PI stands for Principle and Interest which is call the 'Debt Service' or mortgage payment. This is calculated using your calculator based on the terms of the mortgage. The MHE starts with PI and adds items like monthly property taxes, insurance, homeowners association dues, and mortgage insurance, if applicable.

Qualifying the Buyer Problem 1:

PI=$614.30 (n=260, i%=.10/12, PV=70,000, FV=0, solve for PMT)

MHE = $614.230+ $84+$21+$24=$743.30

TMD=$743.30+$380+$65=$1,188.30

SMI=$3,200+$240=$3,440

MDR= MHE/SMI = $743.30/$3,440=.2161 --> Make the loan

TDR=TMD/SMI=$1,188.30/$3,440=.3454 ---> Make the loan



Student Question:
On problem 1, in the video for Mortgage Underwriting, i am having extreme difficulty in trying to figure out how you came up with the MHE of $743.22. I'm not sure if i'm completely missing something, but i cant find any information in the text and i have tried several ways of adding up the numbers to try and get even close to that number. Also, what is meant when you say "debt service of $614.23?" Please explain how to calculate MHE. Thanks!

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