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LOAN OFFICER ACADEMY · PAGE 1 OF 3

Mortgage Foundations & Loan Programs

Start with the language and math every loan officer uses. Learn the major mortgage programs, how LTV and DTI work, and how DSCR loans are evaluated.

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Home buyers reviewing mortgage information
Education only. Program limits and underwriting rules change. Always verify current agency, investor and lender guidelines before making an eligibility or credit decision.
THE STARTING POINT

Think Like a Loan Officer

Every file begins with the same basic questions: Who is borrowing? What are they buying or refinancing? What income can be documented? What debts must be counted? How much are they borrowing compared with the property value? How much money is available to close? Which program best fits the borrower and property?

5 numbers to knowIncomeMonthly debtLoan amountProperty value / priceAvailable assets
LESSON 1

Mortgage Math You Must Know

LTVLoan Amount ÷ Property Value

$285,000 loan ÷ $300,000 value = 95% LTV.

CLTVAll Mortgage Balances ÷ Value

$240,000 first + $30,000 second ÷ $300,000 = 90% CLTV.

Front-End DTIHousing Expense ÷ Gross Income

$2,100 housing ÷ $7,000 monthly income = 30%.

Total DTIHousing + Monthly Debts ÷ Gross Income

$3,150 total obligations ÷ $7,000 income = 45%.

DSCRProperty Cash Flow ÷ Housing Expense

$2,400 qualifying rent ÷ $2,000 PITIA = 1.20 DSCR.

Cash to CloseDown Payment + Costs − Credits

Then verify eligible assets, sourcing, gifts, reserves and program requirements.

Important:

LTV calculations can use the lower of purchase price or appraised value on many purchase transactions, while refinance rules may use appraised value and seasoning requirements. Always use the applicable program rule.

LESSON 2

Understanding the Major Loan Programs

ProgramBest Starting UseWhat the LO Must Watch
ConventionalPrimary, second home and investment financing.Credit, AUS, LTV, MI, income, reserves and agency rules.
FHAPrimary residence financing with flexible down-payment and credit features.Mortgage insurance, FHA property standards, identity of interest, gifts and FHA-specific underwriting.
VAEligible veterans, service members and certain surviving spouses.COE/entitlement, residual income, funding fee or exemption, occupancy and VA property requirements.
USDAEligible rural primary residences and qualified households.Property eligibility, household income limits, guarantee fee and USDA underwriting requirements.
DSCRInvestment properties qualified mainly from property cash flow.Rent calculation, PITIA, DSCR ratio, LTV, credit, reserves and lender-specific investor rules.
Non-QMBorrowers or properties that do not fit standard agency documentation.Bank statements, 1099, asset utilization, investor overlays, pricing and documentation.
LESSON 3

DSCR: A Simple Example

Monthly qualifying rent$2,500
Monthly PITIA$2,000
DSCR1.25

The basic calculation is $2,500 ÷ $2,000 = 1.25. A ratio above 1.00 means the qualifying property income exceeds the housing expense under that calculation. But lender rules determine what rent may be used, whether vacancy factors apply, required reserves, minimum credit, acceptable property types, and minimum DSCR.

Do not teach “one DSCR rule.”

DSCR is a non-QM/investor product category. Terms and qualifying methods vary by lender, so the loan officer must check the current lender matrix before quoting eligibility.