ACTIVITY: Final Paper – Part 2 (Financing Scenario)
Let’s continue our final pro
ACTIVITY: Final Paper – Part 2 (Financing Scenario)
Let’s continue our final project for this class by writing out the financing scenario for the borrowers. Download the mock data in this form, Borrower Mortgage Profile Data, and save it to your computer or cloud drive. Use this data (or create your own) to write your two paragraphs that will be part of the narrative report for the final paper. Please use. this. text. book Real Estate Finance 8th Edition by Walt Hubert and Walt Zozula, 2018. ISBN: 978-1626841789 Here’s the data sheet:
You will also need to calculate a mortgage payment. Click here to access Karl’s Mortgage, which is a free resource that you can also install on your phone as an app: https://www.drcalculator.com/mortgageLinks to an external site.
PLEASE SCROLL DOWN TO THE BOTTOM FOR 2 VIDEOS THAT WALK YOU THROUGH THE ASSIGNMENT STEP-BY-STEP.
Instructions
First, read the textbook Chapter 13 (pages 359-365) and textbook Appendix 1 (Real Estate Finance Mathematics; pages 431-438). If you are using the previous version (7th edition), refer instead to Chapter 15, “Real Estate Finance Mathematics”.
Next, using the mock data found in the profile sheet, write 3 paragraphs with facts about the mortgage loan scenario and financial calculations. Answer the questions below (shown in the template) in complete sentences. Write 3 to 5 sentences for each of the three paragraphs.
Lastly, insert textbook pages in parenthesis from Chapter 13 or Appendix 1 and submit assignment here in Canvas. Insert at least one textbook citation (page numbers in parenthesis) per paragraph.
NOTE: You may use your own mock data, rather than the mock data supplied, if you prefer. Do NOT use anyone’s real social security number or other confidential data.
TEMPLATE
Financing Scenario
In the first paragraph, what is the address of the house? How much is the house purchase price? What is the down payment and what amount will be financed? What is the loan to value (LTV)? What are the closing costs? Reference the textbook (Chapter 13 or Appendix 1).
In the second paragraph, we will examine and calculate the loan ratios. What are the monthly housing costs with the new mortgage loan? With the new loan, what would be the debt-to-income (DTI) ratio as the front-end and back-end loan ratios? In the third paragraph, answer these risk-related questions with full sentences. Is this loan likely to be underwritten by the mortgage company? Why or why not? What type of risks would the lender encounter? How would the risks be minimized? Reference the textbook (Chapter 13 or Appendix 1).
Additional Resources
Acronyms and ExplanationsFront end ratio = Housing costs. PITI + HOA + any other costs, example: Mello-Roos
PITI = Principal, Interest, Taxes, & Insurance
HOA = Home Owners Association (example: monthly dues for condo or PUD)
Mello-Roos = Assessment for public improvements added to property tax bill Back end ratio = housing costs (above) + ALL OTHER DEBTS THAT APPEAR ON YOUR CREDIT REPORT
FHA Debt Ratios = http://www.fhahandbook.com/debt-ratios.phpLinks to an external site.
Loan Calculations – Example
Module 4 Overview PLUS Module 4 Activity (Loan Calculations): Module 4 – Another video walkthrough step-by-step Example
DO NOT COPY THIS SAMPLE ASSIGNMENT WORD FOR WORD. Please use the structure as an example only and write in your OWN words. In addition, you will need to do some basic math calculations.
Ima Student
January 1, 2021
BRE-126
Real Estate Financing by Huber
Module 4
Financing Scenario
For Mickey and Minnie Mouse’s loan application the property to be purchased is located at 1961 Rams Road, Victorville, California, 92395. The purchase price is $__________. Since it is an FHA loan, the downpayment is ___%, which is $__________ (p. 434-435). Therefore the loan-to-value (LTV) is ___%, and the loan amount is $__________. Closing costs are approximately ___% of the purchase price, which calculates to $________. Mickey and Minnie Mouse’s monthly housing costs with the new mortgage loan includes $_______ for the mortgage principal and interest, $______ for the property taxes, $______ for the fire hazard insurance, and $_____ for the MIP insurance, for a total of $________ per month. Calculating the total monthly debts would include the housing total of $______ plus the other three debts listed ($_____) for a total of $_______ monthly debts (p. 361). That makes the debt-to-income (DTI) ratio for the front-end: monthly housing cost $_______ , divided by total monthly income $_______ equals ____% DTI. The back-end loan ratio is total monthly debts $_______, divided by $_______ total monthly income equals ____% DTI. Yes, this loan is likely to be underwritten by the mortgage company because ____________________________. Possible risks for the mortgage lender would include __________________. However, the risks would be minimized because ______________________ (p. 362).