Calculation of First Ratio:

When Occupancy Type = Primary Residence

Scenario 1 = Qual Rate = Interest Rate (Note Rate)

Numerator = Total of all Proposed Expenses

Sample calculation:

Denominator = Total of all income

a. Income Includes Income of all Borrowers and Co-Borrowers (If the Loan File has multiple
applications)
b. Net cash flow from Subject property

Sample Calculation: Application 1 Income Section:

Sample Calculation: Application 2 Income Section:

Net Cash flow from Subject Property

Denominator = $ 12,300 + $75 + $100

= $ 12,475
Calculation = Numerator /Denominator = ($1490/$ 12,475) * 100 = 11.944

Scenario 2: Interest Rate is not equal to Qual Rate

Denominator = Total of all income

a. Income Includes Income of all Borrowers and Co-Borrowers (If the Loan File has multiple
applications)
b. Net cash flow from Subject property

Sample Calculation: Application 1 Income Section:

Sample Calculation: Application 2 Income Section:

Net Cash flow from Subject Property

Denominator = $ 12,300 + $75 + $100

= $ 12,475
Numerator = Proposed Expenses (Total of all Proposed housing expenses (using the qualifying interest
rate to calculate P&I)

Add all Proposed Expense except First Mortgage

$35 + $ 163 = $198

Calculation of First Mortgage using qual rate

Loan Term = 360

L= $ 256,000

C = Qual rate( In Percent) /(12*100)

C = 3 /(12*100)

C = 0.0025

Proposed First Mortgage (using Qual Rate) = 256000 * ( 0.0025* (1+.0025)^360 / (1+ 0.0025)^360 -1)

= $1079. 30

Adding all proposed expenses including the Proposed First Mortgage calculated from Qual Rate

= $198 + 1079.30 = 1277.30 (Numerator)

First Ratio = 1277.30 * 100 / 12475 = 10.23%

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When Occupancy Type = Second Home or Investment Property

Note Only change in the calculation will be Numerator

Numerator = Sum of all Present expenses in the Loan File

Application 1:

Application 2

Numerator = 1691 + 500 = $ 2191