LOAN OFFICER KNOWLEDGE BASE

Mortgage Math Knowledge Base

The formulas are simple. The skill is knowing which numbers belong in them and what the result means for program selection.

BACK TO KNOWLEDGE BASE

What You Need to Know

Front-end housing ratio

Housing expense ÷ gross qualifying monthly income. Some programs use a specific housing-ratio benchmark; others rely more heavily on AUS/full risk assessment.

Back-end / total DTI

Total qualifying monthly obligations including housing ÷ gross qualifying monthly income.

LTV

Loan amount ÷ applicable property value basis. Higher LTV generally means less borrower equity and may affect MI, pricing and eligibility.

CLTV

First mortgage + subordinate liens ÷ applicable property value. Important when a second mortgage/HELOC is present.

Cash-to-close

Down payment is only one component. Closing costs, prepaid taxes/insurance, escrow setup, credits, deposits and financed fees all affect final cash.

Payment

Qualification payment can include principal, interest, taxes, insurance, mortgage insurance/annual fee and HOA as applicable.

DSCR

For investor programs, eligible rent ÷ qualifying PITIA/debt service under the specific lender’s method.

Questions to Ask — and Why

QUESTION TO ASK

WHY YOU ASK IT

WHAT THE ANSWER CHANGES

What is the full proposed housing payment—not just principal and interest?

Qualification often includes taxes, insurance, MI/annual fee and HOA.

Prevents understated DTI.

Is there a second lien or HELOC?

First-lien LTV alone may hide total leverage.

Requires CLTV calculation.

Is the appraised value lower than the purchase price?

Applicable value basis may change LTV/cash structure.

Can increase required cash or affect eligibility.

Are any debts being paid off at closing?

Program rules determine whether liabilities can be excluded.

Can change total DTI if properly documented.

Training standard: A student should be able to explain the concept in their own words, identify the borrower question that reveals it, and name the documentation or calculation that supports the answer.