The Application Appointment

$($A simple calculator and notepad is helpful for this activity.$)$

You are a loan originator, and you have a new couple, Pat and Kris as customers who would like to apply for a mortgage loan. They are new to the homebuying process and have a lot of questions. They have done quite a bit of research online and have become aware of a few of the questions they should ask when applying for a home loan but could still really use some guidance on finding the right solution to their homebuying needs.

They call to set up an appointment, and you inform them of the information that they will need to bring in with them to the application. Pat is $22$ and has been self$-$employed for the past four years, and Kris is $23$ and is a recent college graduate and has just begun her first year as a school teacher.

$1)$ What items should you ask them to bring in$?$

Documents such as income docs, bank statements, tax returns, and forms of identification.

In the initial phone call, they offer information that they are looking at a specific two bedroom home with a sales price of $$150,000\mathrm{.}00.$ They have $$18,000\mathrm{.}00$ to put towards a down payment, closing costs and prepaid expenses. It is in an up and coming neighborhood where homes are just now beginning to be renovated and sold. The home they are interested in has recently been renovated and put on the market by a home flipper.

$2)$ What types of additional questions should you ask Pat and Kris?

You set a time for Pat and Kris to come in for the loan application. You are in the process of going thru the loan application. This is the time where you need to ask appropriate questions relating to their financial situation, current and future, that will help you as a loan originator create an appropriate loan scenario for Pat and Kris. Thru interviewing Pat and Kris, you determine that they are planning on being in the house a maximum of $7$ years. As a teacher, Kris has a contract for $$45,000$ per year. Pat being self employed shows on tax returns and income of $$30,000$ per year. They have currently monthly debt of $$823$ per month that includes a car lease and credit card bills. Kris also has a Student loan for $$42,000\mathrm{.}00$ that is in deferment for the next three months. It will have a payment of $$323\mathrm{.}00$ per month when out of deferment.

What would their maximum loan payment be based on the parameters provided based on a maximum debt to income ratio of $43\%?$What would their maximum loan payment be based on the parameters provided based on a maximum debt to income ratio of $43\%?$ 

$$6250$ monthly X $43\%=2687\mathrm{.}00$

Please answer the following questions in your response:

$1)$ What items$/$documents should you ask them to bring in$?$

$2)$ What types of additional questions should you ask Pat and Kris?

$3)$ What is an example of an illegal discriminatory question to ask Pat and Kris regarding their age?

$4)$ Math Breakdown:

What would their maximum allowable debt be based on a maximum debt to income ratio of $43\%?$ 

The lender has maximum qualifying ratios of $28\%$ for housing to income and $43\%$ for total debt to income. What would their maximum loan payment $($PITI$)$ qualify Pat and Kris for $($after taking into account their other monthly debts$)?$

Using the following numbers to answer the question "Would Pat and Kris be able to purchase this house?" $($explain your reasoning$)$ 

$761$ Principal and Interest

$150\mathrm{.}00$ Monthly Homeowners Insurance

$165\mathrm{.}00$  Monthly Taxes

$121\mathrm{.}00$  Monthly Private Mortgage Insurance

Don't forget to take into account other monthly debt obligations