2. Jim has an annual income of $185,000. Apple bank has a maximum front end DTI limit of 28%, what is the most they will allow Jim to spend on monthly principal, interest, taxes and insurance?

3. Jim has an annual income of $185,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70.

Apple bank has a maximum front end DTI limit of 28%, what is the most they will allow Jim to spend on a monthly mortgage?

4. Jim has an annual income of $185,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70.

Jim has $178 in monthly student loan payments.

Apple bank has a maximum back end DTI limit of 28%. Given the back end DTI constraint, what is the most they will allow Jim to spend on a monthly mortgage payment?

5. Jim has an annual income of $185,000.

Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70.

Jim has $178 in monthly student loan payments.

Apple bank has a maximum front end DTI limit of 28% and a maximum back end DTI limit of 36%. Given both limits, what is the most they will allow Jim to spend on a monthly mortgage payment?

6. Jim has an annual income of $185,000.

Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70.

Jim has $178 in monthly student loan payments.

Apple bank has a maximum front end DTI limit of 28% and a maximum back end DTI limit of 36%. Both limits must be satisfied.

Apple bank is offering a fully amortizing 30 year FRM at an annual rate of 4%, with monthly payments, compounded monthly.

What is the biggest loan Jim can get?

7. Jim has an annual income of $185,000.

Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70.

Jim has $178 in monthly student loan payments.

Apple bank has a maximum front end DTI limit of 28% and a maximum back end DTI limit of 36%. Both limits must be satisfied.

Apple bank is offering a fully amortizing 30 year FRM at an annual rate of 4%, with monthly payments, compounded monthly.

Apple Bank allows a maximum LTV of 80%.

How much is the most expensive house Jim can buy?

8. Sam bought a house that costs $500,000. Sam got a 96% LTV loan. The lender demanded that Sam buy private mortgage insurance to insure the portion of the loan over 75% LTV.

Suppose 5 years later, Sam's mortgage balance is $400,000. However Sam defaults and his house sells for $150,000 in a foreclosure auction. How much will the mortgage insurance company pay Sam's lender?

9. Tom paid $12k in mortgage interest and $8k in property taxes last year.

His average tax rate is 21.5%, his marginal tax rate is 28%.

Compute Tom's tax shield from the mortgage interest and property tax deduction.

10. Jill buys a house for $800k, lives there for exactly 10 years and sells it.

Suppose Jill's annual cost of ownership is exactly equal to the annual rent she would have paid to live in the same house.

Suppose the price of Jill's house grows 4.5% annually.

Compute Jill's annual IRR from owning net of renting.

(hint: look at the buy vs rent slides, assume no mortgage or buying/selling expenses.)

11. Jill buys a house for $800k, lives there for exactly 10 years and sells it.

Suppose Jill's annual cost of ownership is exactly equal to the annual rent she would have paid to live in the same house.

Suppose the price of Jill's house grows 4.5% annually.

Buying expenses are 5% of purchase price and selling expenses are 8% of sale price.

Compute Jill's annual IRR from owning net of renting.

(hint: look at the buy vs rent slides, assume no mortgage.)

Zicklin School of Business Baruch College Homework #4 RES3200: Residential Underwriting & Valuation Instructions: 1. Round all final dollar amounts to the nearest cent and don't enter the dollar sign. E.g. if the answer is $1,022.912, enter it as 1,022.91. Commas don't matter, hence you can also enter 1022.91. 2. Round all final percentages to the nearest basis point and don't enter the percent sign. E.g. if the answer is 17.238%, enter it as 17.24. If the answer is 0.52%, enter it as 0.52. 1. Which of the following does NOT affect your FICO score? (1) length of credit history (2) income (3) payment history (4) types of credit used Type in the number of the correct answer. 2. Jim has an annual income of $185,000. Apple bank has a maximum front end DTI limit of 28%, what is the most they will allow Jim to spend on monthly principal, interest, taxes and insurance? 3. Jim has an annual income of $185,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70. Apple bank has a maximum front end DTI limit of 28%, what is the most they will allow Jim to spend on a monthly mortgage? 4. Jim has an annual income of $185,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70. Jim has $178 in monthly student loan payments. Apple bank has a maximum back end DTI limit of 28%. Given the back end DTI constraint, what is the most they will allow Jim to spend on a monthly mortgage payment? 5. Jim has an annual income of $185,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70. Jim has $178 in monthly student loan payments. Apple bank has a maximum front end DTI limit of 28% and a maximum back end DTI limit of 36%. Given both limits, what is the most they will allow Jim to spend on a monthly mortgage payment? 6. Jim has an annual income of $185,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70. Jim has $178 in monthly student loan payments. Apple bank has a maximum front end DTI limit of 28% and a maximum back end DTI limit of 36%. Both limits must be satisfied. Apple bank is offering a fully amortizing 30 year FRM at an annual rate of 4%, with monthly payments, compounded monthly. What is the biggest loan Jim can get? 7. Jim has an annual income of $185,000. Jim is looking to buy a house with monthly property taxes of $140 and monthly homeowner's insurance of $70. Jim has $178 in monthly student loan payments. Apple bank has a maximum front end DTI limit of 28% and a maximum back end DTI limit of 36%. Both limits must be satisfied. Apple bank is offering a fully amortizing 30 year FRM at an annual rate of 4%, with monthly payments, compounded monthly. Apple Bank allows a maximum LTV of 80%. How much is the most expensive house Jim can buy? 8. Sam bought a house that costs $500,000. Sam got a 96% LTV loan. The lender demanded that Sam buy private mortgage insurance to insure the portion of the loan over 75% LTV. Suppose 5 years later, Sam's mortgage balance is $400,000. However Sam defaults and his house sells for $150,000 in a foreclosure auction. How much will the mortgage insurance company pay Sam's lender? 9. Tom paid $12k in mortgage interest and $8k in property taxes last year. His average tax rate is 21.5%, his marginal tax rate is 28%. Compute Tom's tax shield from the mortgage interest and property tax deduction. 10. Jill buys a house for $800k, lives there for exactly 10 years and sells it. Suppose Jill's annual cost of ownership is exactly equal to the annual rent she would have paid to live in the same house. Suppose the price of Jill's house grows 4.5% annually. Compute Jill's annual IRR from owning net of renting. (hint: look at the buy vs rent slides, assume no mortgage or buying/selling expenses.) 11. Jill buys a house for $800k, lives there for exactly 10 years and sells it. Suppose Jill's annual cost of ownership is exactly equal to the annual rent she would have paid to live in the same house. Suppose the price of Jill's house grows 4.5% annually. Buying expenses are 5% of purchase price and selling expenses are 8% of sale price. Compute Jill's annual IRR from owning net of renting. (hint: look at the buy vs rent slides, assume no mortgage.)