NMLS MATH QUESTIONS AND ANSWERS A+
GRADED.Buy Quality Materials!
WHAT THE MATH?!
How to determine:
Interest Only Payments
Loan Amount * Interest Rate (Note Rate) = Annual Interest Amount
Loan Amount * Interest Rate (Note Rate) / 12 = Monthly Interest Amount
On a loan amount of $200,000 with a note rate of 6.5%, what is the amount of
interest that the borrower will pay annually?
$13,000
WHY?
200,000 (loan amount) * .065 (interest /note rate) = 13,000 (annual interest payment
amount)
On a loan amount of $500,500 with a note rate of 4.6%, what is the amount of
interest that the borrower will pay monthly?
$1,918.58
WHY?
500,000 (loan amount) * .046 (interest/note rate) /12 (months in a year) =
1,918.58 (monthly interest payment amount)
When the loan amount is multiplied by the note rate, what is the result known as?
Annual Interest Payment Amount
When the loan amount is multiplied by the note rate, then divided by 12, what is
the result known as?
Monthly Interest Payment Amount
WHAT THE MATH?!
How to determine:
Private Mortgage Insurance (PMI)
Annual PMI = Loan Amount * (PMI Factor)
Monthly PMI = Loan Amount * (PMI Factor) / 12
If $90,000 is the loan amount on a $100,000 home with a Fannie Mae/Freddie Mac
coverage rate of 0.62%, what is the monthly PMI cost?
$46.50
WHY?
90,000 (loan amount) * .0062 (PMI factor) = 558 (annual PMI)
558 (annual PMI) /12 (months in a year) = 46.50 (monthly PMI)
What is the calculation for gross monthly income (GMI) if a borrower is paid
hourly?
Pay rate hours worked weekly 52 (weeks per year) /12 (months in a year) = GMI
What is the calculation for gross monthly income (GMI) if a borrower is paid
weekly?
Weekly Pay Amount * 52 (weeks per year) /12 = GMI
What is the calculation for gross monthly income (GMI) if a borrower is paid bi-
weekly?
, Bi-weekly pay * 26 (# of paydays per year) /12 = GMI
What is the calculation for gross monthly income (GMI) if a borrower is paid semi-
weekly/ bi-monthly?
Semi-weekly/bi monthly salary * 2(times per month they get paid) = GMI
OR: semi-weekly/bi-monthly pay rate * 24 /12 = GMI. (Same answer.)
A borrower who is paid $14.50 per hour and works 30hrs per week, has a GMI of
how much?
$1,885.00
WHY?
14.50 (hourly pay rate) * 30 (hours worked per week) * 52 (weeks per year) /12 (months
per year) = 1,885.00 (GMI)
A borrower who receives a bi-weekly fixed-rate salary of $1,000 has a monthly
GMI of how much?
$2,166.67
WHY?
1,000 (bi-weekly pay rate) *26 (pay periods per year) /12 (months per year) = 2,166.67
(GMI)
Every other week is....
BI-WEEKLY
Twice a month is...
BI-MONTHLY
WHAT THE MATH?!
How to determine:
Down Payment Amount (DP; Minimum Investment)
You must first know the minimum requirement for each different loan type!
Loan Amount * the required DP % = DP Amount.
What is the down payment required for an FHA insured loan?
3.5%
What is the down payment required for a USDA loan?
0%
What is the minimum down payment amount required for a conventional loan?
3%
If a property has a sales price of $187,000 and an appraised value of $190,000, a
conventional conforming loan with a DP of 5.0% will require a cash down
payment of what?
$9,350
WHY?
187,000 (loan amount) * .05 (DP % required) = 9,350 (DP amount)
What is the formula to calculate the Loan-To-Value (LTV)?
1st Loan Amount / Lesser of the Sale Price or Appraised Value = LTV%
What is the formula to calculate the Combined-Loan-To-Value (CLTV)?
1st + 2nd Loan / Lesser of the sale price or appraised value = CLTV%
If you have a home with an appraised value of $120,000, a sales price of $125,000,
and the loan amount on the 1st trust deed (TD) of that home is $90,000, and the
loan amount on the 2nd TD is $10,000, what is the LTV? What is the CLTV?
GRADED.Buy Quality Materials!
WHAT THE MATH?!
How to determine:
Interest Only Payments
Loan Amount * Interest Rate (Note Rate) = Annual Interest Amount
Loan Amount * Interest Rate (Note Rate) / 12 = Monthly Interest Amount
On a loan amount of $200,000 with a note rate of 6.5%, what is the amount of
interest that the borrower will pay annually?
$13,000
WHY?
200,000 (loan amount) * .065 (interest /note rate) = 13,000 (annual interest payment
amount)
On a loan amount of $500,500 with a note rate of 4.6%, what is the amount of
interest that the borrower will pay monthly?
$1,918.58
WHY?
500,000 (loan amount) * .046 (interest/note rate) /12 (months in a year) =
1,918.58 (monthly interest payment amount)
When the loan amount is multiplied by the note rate, what is the result known as?
Annual Interest Payment Amount
When the loan amount is multiplied by the note rate, then divided by 12, what is
the result known as?
Monthly Interest Payment Amount
WHAT THE MATH?!
How to determine:
Private Mortgage Insurance (PMI)
Annual PMI = Loan Amount * (PMI Factor)
Monthly PMI = Loan Amount * (PMI Factor) / 12
If $90,000 is the loan amount on a $100,000 home with a Fannie Mae/Freddie Mac
coverage rate of 0.62%, what is the monthly PMI cost?
$46.50
WHY?
90,000 (loan amount) * .0062 (PMI factor) = 558 (annual PMI)
558 (annual PMI) /12 (months in a year) = 46.50 (monthly PMI)
What is the calculation for gross monthly income (GMI) if a borrower is paid
hourly?
Pay rate hours worked weekly 52 (weeks per year) /12 (months in a year) = GMI
What is the calculation for gross monthly income (GMI) if a borrower is paid
weekly?
Weekly Pay Amount * 52 (weeks per year) /12 = GMI
What is the calculation for gross monthly income (GMI) if a borrower is paid bi-
weekly?
, Bi-weekly pay * 26 (# of paydays per year) /12 = GMI
What is the calculation for gross monthly income (GMI) if a borrower is paid semi-
weekly/ bi-monthly?
Semi-weekly/bi monthly salary * 2(times per month they get paid) = GMI
OR: semi-weekly/bi-monthly pay rate * 24 /12 = GMI. (Same answer.)
A borrower who is paid $14.50 per hour and works 30hrs per week, has a GMI of
how much?
$1,885.00
WHY?
14.50 (hourly pay rate) * 30 (hours worked per week) * 52 (weeks per year) /12 (months
per year) = 1,885.00 (GMI)
A borrower who receives a bi-weekly fixed-rate salary of $1,000 has a monthly
GMI of how much?
$2,166.67
WHY?
1,000 (bi-weekly pay rate) *26 (pay periods per year) /12 (months per year) = 2,166.67
(GMI)
Every other week is....
BI-WEEKLY
Twice a month is...
BI-MONTHLY
WHAT THE MATH?!
How to determine:
Down Payment Amount (DP; Minimum Investment)
You must first know the minimum requirement for each different loan type!
Loan Amount * the required DP % = DP Amount.
What is the down payment required for an FHA insured loan?
3.5%
What is the down payment required for a USDA loan?
0%
What is the minimum down payment amount required for a conventional loan?
3%
If a property has a sales price of $187,000 and an appraised value of $190,000, a
conventional conforming loan with a DP of 5.0% will require a cash down
payment of what?
$9,350
WHY?
187,000 (loan amount) * .05 (DP % required) = 9,350 (DP amount)
What is the formula to calculate the Loan-To-Value (LTV)?
1st Loan Amount / Lesser of the Sale Price or Appraised Value = LTV%
What is the formula to calculate the Combined-Loan-To-Value (CLTV)?
1st + 2nd Loan / Lesser of the sale price or appraised value = CLTV%
If you have a home with an appraised value of $120,000, a sales price of $125,000,
and the loan amount on the 1st trust deed (TD) of that home is $90,000, and the
loan amount on the 2nd TD is $10,000, what is the LTV? What is the CLTV?
