(20 hr) Day 1- 2 GMK - Case Studies 1 - 7

Students - when commenting on the following Case Studies, be sure and start your response with the corresponding Case Study number ( ex : 1 of 7)

Class Blog (1 of 7)
Restoration of VA Home Loan Entitlement 


A mortgage loan originator is working with a veteran who had previously used his VA home buying benefits. The veteran advised the mortgage loan originator that the loan no longer exists. The mortgage loan originator in turn advised the veteran that if he had paid off the prior VA loan and disposed of the property that the eligibility can be restored for additional use.  What the veteran did not tell the MLO was that the home had been sold on assumption and that the assuming borrower defaulted on the loan.  This veteran had been liable for the deficiency that the VA incurred in liquidating the property and the VA settled for payment representing fifty percent (50%) of the deficiency.  The veteran was released from future liability with the settlement. 



What should the mortgage loan originator tell the veteran about the reusability of that entitlement?


Class Blog (2 of 7)

The Conservative Risk Taker  




What should conservative borrowers be looking for when they begin shopping for an arm product?
Class Blog (3 of 7)
Picking The Right Score for Consideration  

A young married couple is attempting to purchase their first home. Both have established credit and both have historically paid their bills on time. In this relationship, he is considered to be the primary wage earner. They have ten percent (10%) to invest in down payment and their lender has advised them that the minimum acceptable credit score for a ninety percent (90%) loan to value loan is 715. The lender runs a factual data credit report on the couple and the credit scores are reported as follows:


            Him: 755-670-695                   Her: 825-795-812


Would this couple meet the required criteria for the 90% LTV loan?



Class Blog ( 4 of 7)

Housing/Debt Ratios #1 
The applicants’ gross income totals six thousand dollars ($6,000), their monthly house payment totals one thousand dollars ($1,000), plus they have two car payments of five hundred dollars ($500) and four hundred dollars ($400), a student loan for ninety dollar ($90) per month, and credit card payments of one hundred and ten dollars ($110).


What are the housing ratio and the total debt ratio? (show your math)



Class Blog (5 of 7)
Housing/Debt Ratios #1 
A borrower buys a house for four hundred and thirty seven thousand, five hundred dollars ($437,500) and qualifies for a ninety percent (90%) maximum LTV.  Closing costs are four thousand five hundred dollars ($4,500), and the borrower made a good faith deposit with a real estate company to be held for seller of one thousand dollars ($1,000). 


How much does the borrower bring to closing?



 Class Blog (6 of 7)

Down Payments #1 
A borrower buys a house for three hundred and seventy-five thousand dollars ($375,000) and qualifies for an eighty percent (80%) maximum LTV.  Closing costs are four thousand five hundred dollars ($4,500), and the borrower made a good faith deposit with a real estate company to be held for seller of one thousand dollars ($1,000). 


How much does the borrower bring to closing?



Class Blog (7 of 7)
Down Payments #2  
A borrower must make a ten (10) percent down payment on a purchase transaction to qualify for the loan.  The borrower made a one thousand dollar ($1,000) good faith deposit at the time of acceptance of the offer to purchase on a home sold for one hundred and seventy-two thousand dollars ($172,000).  The seller agreed to pay closing costs for up to one percent (1%) of the sales price.  The buyer’s closing costs totaled two thousand one hundred dollars ($2,100). 


How much more money does the buyer need to bring to closing?



www.mymortgagetrainer.com

73 comments:

  1. 1 of 7
    The
    mortgage loan originator should do the math and help the veteran understand the costs
    involved. The veteran can either pay off the remaining deficiency or come up with the
    down payment required to offset the shortfall of guarantee necessary to provide the
    twenty-five percent (25%) level required.

    ReplyDelete
  2. 2 of 7
    Conservative arm borrowers should be looking for the longest initial period before the
    first adjustment, the lowest caps affecting payment change and the least volatile index.
    The combination of these elements provides a pretty significant level of predictability to
    the loan.

    ReplyDelete
  3. 4 of 7
    6000 income
    2100 monthly debt
    6000/2100 = 35%

    ReplyDelete
  4. 1 of 7
    The MLO should do the math and help the veteran understand the costs involved. The veteran can either pay off the remaining deficiency or come up with the down payment required to offset the shortfall of guarantee necessary to provide the twenty-five percent (25%) level required.

    ReplyDelete
  5. 2 of 7
    Conservative arm borrowers should be looking for the longest initial period before the first adjustment, the lowest caps affecting payment change and the least volatile index. The combination of these elements provides a pretty significant level of predictability to the loan.

    ReplyDelete
  6. This comment has been removed by the author.

    ReplyDelete
  7. 4 of 7
    Housing
    1000/6000=16.7%
    Debt
    2100/6000=35%

    ReplyDelete
  8. 1 of 7:
    The veteran needs to work with the MLO to see if paying off the first dept. would be better than to just make up the difference on the new loan?

    ReplyDelete
  9. 5 of 7
    47250
    6 of 7
    78500
    7 of 7
    16580

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  10. 2 of 7:
    Looking for the lowest rate for the longest time with the idea of refinancing before the rate or payment increase.

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  11. 3 of 7:
    NO, since he is the primary wage earner you would have to take the middle credit score which doesn't meet the requirements.

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  12. 1 of 7
    There would need to be an evaluation of what the best options are to handle this. A COE might be useful if the VA can provide further information to the MLO in regards to the history of the sale and the veteran seeking the new home loan. Since the information about the defaulted loan was not revealed to the MLO, the first thing I would do is request the COE to better advise the veteran.

    ReplyDelete
  13. 4 of 7:
    Assuming that $6,000.00 is the Monthly income and not yearly.
    1000/6000 = 16.7% Housing ratio
    2100/ 6000 = 35% Combined housing and dept. ratio

    ReplyDelete
  14. 5 of 7:
    $437,500.00 x 10% = $4,3750.00
    Closing costs $4500.00 - $1000.00 deposit = $3500.00
    $43,750.00 + $3,500.00 + $47,250.00 to bring to closing.

    ReplyDelete
  15. 6 of 7:
    Same principles apply as the last question.

    $78,500.00 to bring to closing.

    ReplyDelete
  16. 7 of 7:
    $16,580.00 to closing.

    ReplyDelete
  17. 3 of 7:
    As the primary wage earner, he doesn't meet the 715 requirement. However, I'm uncertain whether the score would be determined by the average of the middle score of both parties combined, in which case, they would qualify.

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  18. 2 of 7:
    They should look for the lowest annual and lifetime caps on the mortgage.

    ReplyDelete
  19. 1 of 7:
    The MLO should explain the difference between a sale that results in a satisfaction of mortgage and an assumption where the seller (veteran) is liable in the event of default. An updated COE should show the amount of eligibility restored.

    ReplyDelete
  20. 4 of 7:
    Gross income:
    $6,000
    Total expenses:
    $2100

    $2100/$6000 = 35% debt ratio
    $1000/$6000 = 16.7% housing ratio

    ReplyDelete
  21. 5 of 7:
    $437,500 x 10% down payment $43,750
    Closing costs $4,500 - $1,000 deposit = $3,500

    Buyer brings to closing $47,750

    ReplyDelete
  22. 6 of 7:
    20% of purchase price of $375,000 = $75,000
    Closing costs = $4,500 less credit for deposit $1,000 = $3,500

    Total to bring to close $78,500

    ReplyDelete
  23. 7 of 7:
    10% of purchase price of $172,000 = $17,200
    Closing costs = $2,100 less credit from seller $1,720 = $380
    Minus $1,000 deposit

    Total to bring to close $16,580

    ReplyDelete
  24. The veteran will need restoration of VA loan entitlement. After doing the math the MLO should discuss with the veteran of the amount needed to pay off deficiency or come up with 25% down payment to offset the shortfall.

    Do Hwang Ji2ga32@Gmail.com

    ReplyDelete
  25. 1 of 1

    Aranza Larranaga Mier

    The MLO should explain to the veteran that even though the loan is paid off and he is technically not liable for that loan anymore, that the VA suffered a loss when they paid the deficiency he left when he defaulted the loan, which makes him unable to reuse this benefit until he has paid the loss that the government has suffered. While the MLO is explaining, he should do the math and see if the veteran can pay the deficiency in full or the down payment required and start anew. The MLO should help the veteran figure out what is the best path for his situation, and if it is worth having a clean slate for future purchases or not. I am unaware of the eligibility for other types of loans if you default in your VA loan and if there are other repercussions other than just losing you VA benefit.

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  26. 2 of 7
    Look for the loan that offers the lowest rate over the longest time possible. If there is a maximum rate, make sure there are enough finances to cover the increase that is inevitable.

    ReplyDelete
  27. Aranza Larranaga MierJanuary 5, 2021 at 10:58 PM

    When looking for an ARM product there are 3 things the borrower should be looking for:

    1. The longest period before the first adjustment happens
    2. The lowest caps available
    3. The less volatile index

    ReplyDelete
  28. 2 of 7

    Longest period before 1st adjustment
    Lowest caps
    least volatile index

    ReplyDelete
  29. 3 of 7
    This doesn't specify whether the qualifying credit score is for the primary wage earner only. If so, the answer would be NO. If it is looking at a combined score, the couple would qualify.

    ReplyDelete
  30. Aranza Larranaga MierJanuary 6, 2021 at 12:18 AM

    3 of 7
    No, the since there are multiple barrowers the lowest median (middle) score is used; in this case it would be 695. The minimum for a 90% loan to value loan is 715 in this case study, so the couple would not meet the requirements.

    ReplyDelete
  31. 1 of 7

    The MLO could've mentioned that if the remaining deficiency is paid that would restore the use of the COE for full entitlement of 25%

    ReplyDelete
  32. 2 of 7

    Borrowers should seek out lowest intro rate/ start rate on a arm to maximize savings before 1st adjustment. Seek out caps on adjustments to save more.

    ReplyDelete
  33. 3 of 7

    Middle score of the 3 is used since he is the primary which means he would not qualify for LTV of 90%

    ReplyDelete
  34. 4 of 7

    1000 housing / 6000 = 16.7%

    2100 total debt / 6000 = 35%

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  35. 5 of 7

    437500 * 10%

    43,750 - 1000

    42,750 + 4500 = 47,250

    ReplyDelete
  36. 6 of 7

    375000 * .2 - 1000 + 4500

    78,500 brings to closing

    ReplyDelete
  37. 7 of 7

    172000 * .1 - 1000 - 1720 + 2100

    $16,580 brings to closing

    ReplyDelete
  38. Aranza Larranaga MierJanuary 6, 2021 at 12:58 AM

    4 of 7

    Gross Income $6,000
    House Payment $1,000
    Car #1 $500
    Car #2 $400
    Student Loans $90
    Credit Card $110
    Housing Obligations: House Payment $1,000 / Gross Income $6,000 = .167 or 16.7%
    Monthly Debt: Total monthly debt $2100/ Gross Income $6000 =.35 or 35%

    ReplyDelete
  39. Aranza Larranaga MierJanuary 6, 2021 at 1:13 AM

    5 of 7

    $47,250

    House: $437,500
    Max LTV: 90%
    Closing Costs: $4,500
    Deposit: $1,000

    Down Payment Needed: $47,250

    $437,500 X 10% = $43,750
    $43,750 - $1,000 Deposit = $42,750
    $42,750 Remining down payment +4500 (closing costs) = $47,250

    ReplyDelete
  40. Aranza Larranaga MierJanuary 6, 2021 at 1:37 AM

    Class Blog (6 of 7)
    Down Payments #2

    Down Payment Needed: $78,500

    House: $375,000
    Max LTV: 80%
    Closing Costs: $4,500
    Deposit: $1,000

    $375,000 X 20% = $75,000
    $75,000- $1,000 Deposit = $74,000
    $74,000 Remining Down Payment + $4,500 (closing costs) = $78,500

    ReplyDelete
  41. Aranza Larranaga MierJanuary 6, 2021 at 1:45 AM

    Class Blog (7 of 7)
    Down Payments #3

    Down Payment Needed: $16,580

    House: $172,000
    Down Payment: 10%
    Good Faith Deposit: $1,000
    Seller’s Closing Costs: 1%
    Closing Costs: $2,100

    $172,000 X 10% = $17,200
    $17,200 - $1,000 Deposit = $16,200
    $16,200 Remining Down Payment + $2,100 (closing costs) = $18,300
    $172,000 X Seller’s concessions 1% = $1,720
    $18,300 - $1,720 = $16,580

    ReplyDelete
  42. 4 of 7
    $1000/$6000 = 16.7% for housing ratio
    $2100/$6000 = 35% for total debt ratio

    ReplyDelete
  43. 5 of 7
    $437,500 X 10% = $43,750
    $43,750 - $1,000 Deposit = $42,750
    $42,750 Remining down payment + 4500 = $47,250

    The buyer needs $47,250

    ReplyDelete
  44. 1 of 7
    The mortgage loan originator should step in and break it all down and help the Vet see what the best case scenario would be in this situation.

    ReplyDelete
  45. 6 of 7
    Buyer needs to bring $78,500 to closing

    ReplyDelete
  46. 2 of 7

    Lowest rate before the time of increase

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  47. 7 of 7
    Buyer needs $16,580 at closing
    17,200 - 1000 = 16,200
    16,200 - 1720 = 14,480
    14,480 + 2100 = 16,580
    $16,580

    ReplyDelete
  48. 3 of 7

    No. Using the lowest rating of the 2 borrowers they would not qualify. The underwriter would have to use other factors to determine if a loan was appropriate.

    ReplyDelete
  49. 4 of 7

    PITI is $1000
    car 1 $500
    car2 $400
    student loan $90
    credit cards $110
    Monthly debt $2100

    Housing ratio 1000/6000 16.7%
    Total debt 2100/6000 35%

    ReplyDelete
  50. 5 of 7

    10% of 437,500 $43,750 because 90% LTV - $1000 Earnest deposit $4,500 closing cost $42,750 + $4,500 = $47,250

    ReplyDelete
  51. 6 of 7

    80% of $375,000 = $300K leaving $75,000 buyer responsibility

    $75,000 - $1000 deposit + $4,500 closing costs =
    $78,500 to closing

    ReplyDelete
  52. 7 of 7

    10% of $172,000 = $17,200 - $1000 Earnest deposit = $16,200 + $2,100 closing cost = $18,300 - 1% Seller help $1,720 = $16,580 to the table.

    ReplyDelete
  53. Alison Roae 1 of7: I would explain the situation to the veteran that although they are no longer liable for the loan, it is law that to be eligible for his va entitlement, he will need to pay the deficiency. I would discuss his 2 options which would be to make right on the prior loan or pay the 25% down payment.

    ReplyDelete
  54. Alison Roae 2 of 7- The borrower should be looking for a combination of things when it comes to deciding on the least risky ARM. They will want to look at the payment & lifetime caps to ensure they can still afford the loan if all of the wheels fall off. Also, they will want to consider what index the ARM will be associated with as each index has it's pros & cons. Finally, they will want to consider the length of the adjustment period & aim for it to be as long as possible between adjustments periods once a rate is set.

    ReplyDelete
  55. Alison Roae 3 of 7- With the couple, the credit score that would be considered would be 695 which would not meet the credit score requirement of 715. However, there could still be other factors that could coexist that would make them eligible that would need to be looked into.

    ReplyDelete
  56. Alison Roae 4 of 7 The housing ratio is:
    $1000/$6000=0.167 which would equate to 16.7%
    The Total Debt Ratio is:
    $2100/$6000=0.35 which equates to 35&

    ReplyDelete
  57. Alison Roae 5 of 7
    $437500x0.1 (10%)=$43750
    $4500-$1000=$3500
    $43750+$3500= $47250 would be the amount the borrower will need to bring to cover closing costs

    ReplyDelete
  58. Alison Roae 6 of 7
    $375000x0.2 (20%)=$75000
    $4500-$1000=$3500
    $75000+$3500= $78500 would be the amount the borrower will nee to bring to cover closing costs.

    ReplyDelete
  59. Alison Roae 7 of 7
    $172000x0.1 (10%)= $17,200 (down payment for loan)
    $2100-$1720=$380
    $17200+$380-$1000= $16580 is the amount the borrower needs to bring to closing

    ReplyDelete
  60. 1 of 7
    The LO should inform the veteran he/she needs to resolve the deficiency directly with the VA to have their eligibility restored.

    ReplyDelete
  61. 2 of 7 If the conservative borrower was planning on moving shortly or a first time home owner they may want a 5/1 arm. I don't think I would be interested in an adjustable rate loan.

    ReplyDelete
  62. 3 of 7 It would seem like both their scores would count equally and if so even though the husbands is a little low, the wife's should bring his up to the 715 for the 90% loan.

    ReplyDelete
  63. 4 of 7 This couple should be ok because their top ratio of dividing their monthly mortgage payment by their monthly gross income is 17% and the bottom ration of their mortgage payment plus their other monthly debts divided by their gross monthly income is 35% does not exceed the 28% top and 36% bottom.

    ReplyDelete
  64. 5 of 7 iF the borrower is good for 90% and paid 1000. to hold then he will need 10% of the loan and 3500. of closing which would be 47,250.00

    ReplyDelete
  65. ! of 7 The MLO would have to tell him because he was liable for the defaulted property and the VA settled for 50% of the deficiency to release the veteran from the balance that he does not qualify to use the VA loan again.

    ReplyDelete
  66. 6 of 7 The borrower needs 20% of 375,000. which is 75,000. and he/she needs 3500. for closing because they have already given 1000. good faith money toward the home.

    ReplyDelete
  67. 7 of 7 The borrower needs 17,500. less the 1000. good faith money toward purchase and his closing cost is 2100. and the seller will pay 1% of the cost which is 1720. which leaves the buyer paying 380. plus the 16,500. and that is 16,580.

    ReplyDelete