Use the following information to answer the questions below Jessie is a lending officer at the local community bank that lends to both residential and commercial borrowers She is well versed in both lending areas For residential mortgages she is most concerned with Loan to Value (LTV) and Debt to Income (DTI) ratios For commercial loans she looks at LTV, Loan to Cost (LTC), Debt Service Coverage Ratio (DSCR) and Debt Yield The community bank's underwriting standards are as follows Residential LTV 80 maximum, 75 for refinance DTI 40 maximum 33 maximum for self employed Commercial LTV 55 maximum LTC 65 maximum DSCR 1 25x minimum Debt Yield 8 minimum Brian Schwartz is a local real estate developer He is working with Jessie to finance both a house he is purchasing and a well located unanchored retail center he is developing The current residential mortgage rates are 7 125 for 30 years and 6 875 for 15 years Brian's house is located in an establish ed first ring neighborhood with increasing property values The house is appraised at $850,000 The unanchored retail center will be located in the same neighborhood The five tenants , including Starbuck's Coffee, have all signed Letter of Intents (LOIs) The budgeted cost to build the retail center is $2,000,000 and is being built to an 8 cap rate according to Brian's underwriting Jessie first underwrites Brian's house Brian is going to put $225,000 down payment on the house What is the LTV for this mortgage Does this meet the community bank's LTV underwriting standard Brian selects the 30 year mortgage option The taxes on the property are $15,000 year and property insurance is $2,100 a year Brian owes $3,500 a month in other debt (i e a car loan, monthly credit card payments and student loans repayment) Brian is self employed real estate developer and owner Brian nets an average income of $250,000 per year What is the DTI ratio Jessie calculates for Brian Does this meet the community bank's DTI underwriting standards Jessie next underwrites the retail development Since all the retail spaces are preleased, she is willing to go up to 65 LTC on the loan How much is the community bank willing to lend on the development Once the property is complete, the property will trade at a 6 cap rate, what will the LTV ratio be upon completion If the property performs to its underwriting and has NOI of $160,000 a year, what is the monthly DSCR ratio for the commercial loan at 7 5 interest rate Does this meet the community bank's underwriting standard For the purpose of your mortgage payment computation, assume Brian will receive an INTEREST ONLY loan The community bank also uses a debt yield computation to avoid lending on overpriced assets What is the debt yield on the retail development Does this meet the community bank's underwriting standard

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Use the following information to answer the questions below: Jessie is a lending officer at the local community bank that lends to both residential and

Use the following information to answer the questions below:

Jessie is a lending officer at the local community bank that lends to both residential and commercial borrowers. She is well versed in both lendingareas.For residential mortgages she is most concerned with Loan-to-Value (LTV) and Debt-to-Income (DTI) ratios. For commercial loans she looks at LTV, Loan-to-Cost (LTC), Debt Service Coverage Ratio (DSCR) and Debt Yield. The community bank's underwriting standards are as follows:

Residential

LTV - 80% maximum, 75% for refinance
DTI - 40% maximum; 33% maximum for self-employed.

Commercial

LTV - 55% maximum
LTC - 65% maximum
DSCR - 1.25x minimum
Debt Yield - 8% minimum

Brian Schwartz is a local real estate developer. He is working with Jessie to finance both a house heispurchasing and a well-located unanchored retail center he is developing. The current residential mortgage rates are 7.125% for 30-years and 6.875% for 15-years.

Brian's house is located in an establishedfirst ring neighborhood with increasing property values. The house is appraised at $850,000. The unanchored retail center will be located in the same neighborhood. The five tenants,including Starbuck's Coffee, have all signed Letter-of-Intents (LOIs). The budgeted cost to build the retail center is $2,000,000 and is being built to an 8% cap rate according to Brian's underwriting.

Jessie first underwrites Brian's house. Brian is going to put $225,000 down payment on the house. What is the LTV for this mortgage. Does this meet the community bank's LTV underwriting standard?
Brian selects the 30-year mortgage option. The taxes on the property are $15,000 year and property insurance is $2,100 a year. Brian owes $3,500 a month in other debt (i.e.- a car loan, monthly credit card payments and student loans repayment). Brian is self-employed real estate developer and owner. Brian nets an averageincome of$250,000 per year. What is the DTI ratio Jessie calculates for Brian? Does this meet the community bank's DTI underwriting standards?
Jessie next underwrites the retail development. Since all the retail spaces are preleased, she is willing to go up to 65% LTC on the loan. How much is the community bank willing to lend on the development? Once the property is complete, the property will trade at a 6% cap rate, what will the LTV ratio be upon completion.
If the propertyperformsto its underwriting and has NOI of $160,000 a year, what is the monthly DSCR ratio for the commercial loan at 7.5% interest rate? Does this meet the community bank's underwriting standard? For the purpose of your mortgage payment computation, assume Brian will receive an INTEREST ONLY loan.
The community bank also usesadebt yieldcomputationto avoid lending on overpriced assets. What is the debt yield on the retail development? Does this meet the community bank's underwriting standard?