This is a math chapter and should be reviewed after you feel comfortable with Chapter 13 & Chapter 16. In the session, we will grasp an understanding of the Loan to Value Ratio (L/V). Definition: the lender’s examination of the borrower’s personal income as the source of funds to make the mortgage payments. The property is owner-occupied. Meaning that the bank must look at the borrower’s personal income as the source of funding for the mortgage payments since there is no income to the owner from the property. To make the decision on what size and kind of loan can be lent, the lender has to look at the characteristics of the borrower and the value of the subject property.
Borrower Qualification – 5 C’s of Credit
1. Credit: Most importantly Credit History – what is a borrower’s credit history when it comes to making payments back to build credit
2. Collateral: What, if any, is additional security for the loan in case the borrower is unable to repay, or if they have bad credit.
3. Character: Is the person applying for the loa, the kind of person that would make all the necessary payment to pay it back in full? Ex. Current and past employment, education, business experience, etc.
4. Capacity: Based on income, can the borrower pay back the loan amount – strictly financially speaking
5. Capital: How much will the borrower personally invest. Ex, downpayment, money saved.
RELATED MATH CHAPTERS:
- Identifying borrower qualifications using the 5 C’s of Credit
- Risk analysis – How much money can a borrower borrow?
- Using a test to see how much income will support GDSR
- Gross Debt Service Ratio techniques.
- Loan to Value Ratio
- Using PMT to find the payment symbolizing maximum payment the borrower can afford
- The Present Value of the max payment
- Loan to Value Ratio (L/V)
Related Course Material:
- Lectures 20
- Quizzes 7
- Duration 2 hours
- Skill level Anyone
- Language English
- Students 87
- Assessments Yes
Chapter 17 Introduction
Borrower Qualification - Risk
Types of Constraints
Residential Borrower Qualification Examples
Commercial Types of Constraints
Chapter 17 Practice 1000 questions