Calculations topic guide
PITI, equity, LTV, points and origination fees
The same loan amount can appear in several formulas, but it does a different job in each. Start by naming the result: a monthly payment, an ownership balance, a leverage ratio or an upfront charge. Then choose the base and units that actually answer that question.
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The short answer
For the basic PITI convention used here, add monthly principal and interest, property tax and homeowners insurance. Current gross equity is current property value minus the stated current secured balances, counted once. LTV is the specified loan amount divided by the required value base, multiplied by 100. One point is 1% of the loan amount. A stated percentage origination fee uses its stated loan base too, but its purpose differs from a discount point.
The public PSI outline effective June 24, 2026 includes these topics within the whole 7% national broker Calculations category, equivalent to 7 of 100 scored questions. That is not a quota for each formula. The examples are original and use their stated assumptions. Basic PITI, a Loan Estimate total and a program's qualifying housing expense are different definitions; follow the one actually requested. Mathematical ratios here are not automatically the program's delivered ratio or a loan-approval decision.
Choose the result, base and units
- Name the requested result before calculating: PITI, total specified outlay, equity, proceeds, LTV or a fee.
- Label each amount monthly, annual, original, current, drawn or available. Convert an annual amount only when the calculation requires a monthly one.
- For equity, identify each stated current secured balance once. A loan and the mortgage securing that same loan are not two separate debts.
- For LTV, identify both the numerator and value base. A purchase-program lower-of rule is not the same as every later current-value estimate.
- For combined ratios, distinguish a drawn HELOC balance from its full credit line and use the definition actually supplied.
- Convert a point or percentage to a decimal before multiplying. A cost percentage does not specify a fixed interest-rate reduction.
- Keep credits, prepaid amounts and escrow collections in their actual categories. Do not add the same tax or insurance amount twice.
- Carry precision through the calculation and apply the requested rounding at the end. Use a named program's separate delivery method only when that is the task.
| Requested result | Stated calculation | Check first |
|---|---|---|
| Basic monthly PITI | Monthly P&I + annual tax / 12 + annual homeowners premium / 12 | Do not convert an amount already monthly |
| Gross equity | Current value - stated current secured balances | Count each debt once |
| Equity percentage | Gross equity / same current value x 100 | Can be negative; not necessarily 100 minus first LTV |
| LTV | Relevant loan / required value base x 100 | Original or current; purchase or other stated basis |
| CLTV in the stated example | First amount + closed-end balance + drawn HELOC, divided by value | Use the actual definition |
| HCLTV in the stated example | First amount + closed-end balance + unmodified full HELOC line, divided by value | Do not also add the draw |
| Point cost | Loan amount x points / 100 | Loan, not sale price |
| Stated origination fee | Specified loan base x stated fee percentage | Purpose differs from discount points |
| Simple point payback | Stated extra upfront cost / constant monthly saving | Limited model, not full financial advice |
| Loan from fee cost | Percentage-based charge / its decimal rate | Rate and cost must refer to the same stated charge |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| Basic PITI and other housing totals | Here basic PITI means P&I, tax and homeowners insurance. Loan Estimate payment rows and Fannie Mae qualifying PITIA use their own components, including specified mortgage insurance and other costs. | Do not infer that mortgage insurance is universally excluded from every use of PITI or included in every total. |
| An annual amount and an already monthly amount | Annual tax or premium divided by 12 gives the stated monthly allocation. An amount already described as monthly is not divided again. | Annual tax $7,200 is $600 monthly; already monthly insurance $150 stays $150. |
| Escrow collection and an additional expense | Escrow can collect money for tax and insurance. If those same amounts are already in the collection, adding them again duplicates the expense. | No escrow does not make tax or insurance disappear; initial closing funding is a separate timing item. |
| Principal repayment and the full P&I payment | Only the principal component reduces the balance. The interest component is a borrowing cost. A fixed note rate does not make every ownership cost fixed. | Loan balance x note rate / 12 can be one month's interest in a stated monthly exercise, not automatically a fully amortizing P&I payment. |
| Current equity and original down payment | The stated current value and current secured balances determine this equity estimate. Appreciation, principal repayment and later secured borrowing can change it. | An unsecured personal debt is not automatically another property lien, and the original loan is not always the current balance. |
| Gross equity and sale proceeds | Gross equity is a value-minus-debt estimate. Sale proceeds use the actual sale price, dated payoffs, costs, credits and adjustments. If starting from an equity amount that already subtracts debt, do not subtract the same debt again. | A payoff can include interest and fees beyond a displayed principal balance; equity is not a guaranteed cash withdrawal. |
| LTV and a universal value rule | The required numerator and denominator depend on the task. The cited Fannie Mae general purchase rule uses the original note amount and lower of price or current appraisal; its refinance and special-transaction rules differ. | A current-balance/current-value classroom estimate is not automatically original program LTV. |
| LTV, CLTV and HCLTV | In the stated Fannie Mae-style example, first-mortgage LTV is separate from CLTV using the drawn HELOC balance and HCLTV using the unmodified full line. Closed-end subordinate balances are included as specified. | Do not add both the HELOC draw and its full line in HCLTV, or treat unused capacity as current equity debt. |
| Equity percentage and 100 minus LTV | They complement one another only when the same value base and same debt set are used. A first-mortgage LTV can omit subordinate balances that current equity includes. | One loan at 80% can leave 20% gross equity on the same base; another lien changes that comparison. |
| A discount point and an origination fee | One point is a percentage cost. Discount points connected to rate pricing differ in purpose from making and administering the loan, even when both charges use a percentage. | A percentage-based charge is not automatically a rate-buydown charge. |
| One point and one percentage point of interest | One point is 1% of the loan amount. The actual pricing tradeoff is not a guaranteed one-percentage-point reduction in the note rate. | Identify the offered pricing separately from the multiplication. |
| A lender credit and a reduction in principal | A credit can offset closing costs under its actual terms. Rate-related credits generally trade lower upfront costs for higher rate, but some credits are unrelated to rate. | A worksheet's negative points label is not automatic principal forgiveness or a claim that every credit has the same purpose. |
| A simple break-even calculation and a complete decision | Upfront extra cost divided by a stated constant monthly saving gives a simple payback period. It does not include time value, tax effects, other costs or every refinance scenario. | The result alone is not a recommendation to buy points or a guarantee of total savings. |
| Arithmetic rounding and program delivery | Round a classroom answer as instructed. The cited Fannie Mae delivery method first truncates the ratio to two decimal places, then rounds up to a whole percent; lenders can use the same or a higher result. | That named method is not a universal PSI rule or permission to ignore eligibility requirements. |
Work through the facts
Build a monthly PITI payment
For the stated basic PITI exercise, monthly P&I is $2,180, annual property tax is $7,200 and annual homeowners insurance is $1,800. Include only those named components and assume no other adjustment.
- Monthly taxes are $7,200 / 12 = $600.
- Monthly insurance is $1,800 / 12 = $150.
- This is the stated classroom total, not every program's qualifying housing expense or all-cost ownership budget.
Answer: PITI is $2,180 + $600 + $150 = $2,930 per month. Do not add an unstated association fee or mortgage-insurance premium.
Calculate equity with two liens
A property is worth $610,000. Its first-mortgage balance is $352,000 and a home-equity loan balance is $48,000.
- Total secured debt is $352,000 + $48,000 = $400,000.
- Equity is current value minus both balances.
Answer: Dollar equity is $610,000 - $400,000 = $210,000. Equity percentage is $210,000 / $610,000 = about 34.43%.
Use the lower value base for purchase LTV
A buyer agrees to pay $425,000, the appraisal is $410,000, and the first mortgage is $328,000. The problem directs you to use the lower of price or appraised value.
- The required value base is $410,000, not the $425,000 price.
- $328,000 / $410,000 = 0.80.
Answer: The LTV is 80%. Using the sale price would produce about 77.18% and answer a different calculation.
Separate points from origination fees
A $360,000 loan has 1.25 discount points and a separate 0.75% origination fee.
- Discount-point cost is $360,000 x 0.0125 = $4,500.
- Origination fee is $360,000 x 0.0075 = $2,700.
Answer: The two loan charges total $7,200. Only the $4,500 item is identified as discount points tied to rate pricing.
Do not count the same escrow components twice
For a stated monthly lender-bill exercise, P&I is $2,180 and escrow is $750, expressly consisting of $600 tax and $150 homeowners insurance. Assume no other bill component.
- The escrow already contains the named tax and insurance allocations.
- $2,180 + $750 = $2,930.
- Adding $600 and $150 again would incorrectly produce $3,680. The escrow mechanism does not create a second tax or premium.
Answer: The stated bill is $2,930; it does not include a duplicate $750 of the same expenses.
Use three different leverage numerators
Use the stated Fannie Mae-style definitions with a $500,000 value base. The first mortgage is $350,000 both originally and currently; the closed-end second balance is $25,000. The HELOC has $15,000 drawn and an unmodified $50,000 full line. Assume no special adjustment.
- First LTV: $350,000 / $500,000 = 70%.
- CLTV: ($350,000 + $25,000 + $15,000) / $500,000 = 78%.
- HCLTV: ($350,000 + $25,000 + $50,000) / $500,000 = 85%. Do not add the $15,000 draw again.
- Current drawn balances total $390,000, so the stated gross equity is $110,000, or 22%. The unused line is capacity, not another current debt.
Answer: The stated ratios are 70% LTV, 78% CLTV and 85% HCLTV; current gross equity is 22% on the same stated snapshot.
Keep negative equity negative
A property has a stated current value of $300,000 and current secured balances of $325,000. No sale costs or other adjustments are requested.
- Gross equity is current value minus the stated secured balances.
- $300,000 - $325,000 = -$25,000.
- Do not reverse the subtraction or replace the negative result with an assumed zero. This does not determine a lender's recovery or the owner's actual sale proceeds.
Answer: The stated gross equity is negative $25,000.
Read a simple points payback as a limited model
For a simple exercise, extra upfront cost is $3,600 and the comparable loan produces a constant $60 monthly payment saving. Ignore time value, taxes, other costs, sale and refinance effects.
- Simple payback is the stated extra cost divided by the stated constant saving.
- $3,600 / $60 = 60 months.
- The simplified calculation does not establish total discounted savings or recommend a loan choice.
Answer: The stated simple payback period is 60 months under those assumptions.
A lower appraisal changes the price funding gap
For a classroom maximum-first-loan calculation, price is $425,000, appraisal is $410,000 and the specified maximum ratio is 80% of the lower amount. Assume no other value adjustment. Find only the price not funded by that first loan.
- The stipulated value base is $410,000; the stated first-loan maximum is $410,000 x 0.80 = $328,000.
- Price minus that loan is $425,000 - $328,000 = $97,000. Using 20% of price would give $85,000 and miss the lower value base.
- The $97,000 consists of $82,000 against the eligible value plus the $15,000 price-over-appraisal difference. Actual other costs, deposits, credits, financing and approval requirements are outside this calculation.
Answer: The stated price funding gap is $97,000, not a complete cash-to-close estimate or an actual loan approval.
Apply a credit to the stated fee subtotal once
The specified loan charges are $4,500 discount points and a separate $2,700 origination fee. Assume a permitted general lender credit of $1,200 offsets this subtotal, with no other amount requested.
- The two stated charges total $7,200.
- Apply the stated credit once: $7,200 - $1,200 = $6,000.
- The credit is not principal forgiveness, does not reclassify the fees and does not establish all costs or funds needed at closing. The listed discount-point charge remains $4,500.
Answer: The net stated charge subtotal is $6,000; full cash to close requires its own complete calculation.
Mistakes to avoid
- Treating basic PITI as every housing total Use the stated components or named form/program definition.
- Dividing an already monthly premium by 12 Convert only the annual figure.
- Adding escrow and the same tax and premium again Identify what the collection already contains.
- Treating every dollar of P&I as principal reduction Separate the interest component.
- Subtracting a loan and its security instrument as two debts Count the stated secured balance once.
- Treating gross equity as guaranteed sale proceeds Use actual price, dated payoffs and closing adjustments for proceeds.
- Using one denominator for every LTV purpose Follow the named value rule and transaction type.
- Counting an unused HELOC line as current equity debt Distinguish drawn debt from capacity and the HCLTV definition.
- Assuming every first-mortgage LTV complements all-lien equity Use the same base and debt set before comparing.
- Assuming one discount point buys a one-percentage-point cut The fee percentage and actual rate tradeoff are different.
- Calling every percentage origination charge a discount point Use the charge's purpose and applicable disclosure category.
- Treating a simple payback period as a complete loan recommendation Its assumptions omit other costs and timing effects.
- Using Fannie Mae delivery rounding as a universal exam instruction Keep the named program rule and requested classroom rounding separate.
- Using an original practice target as a proven pass probability No validated readiness cutoff is established for this set.
Check your understanding
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. Monthly principal and interest are $1,940. Annual taxes are $6,600 and annual homeowners insurance is $1,440. What is monthly PITI?
- $2,060
- $2,610
- $2,490
- $2,730
Show answer and explanation
Answer: B. $2,610
Under the basic PITI convention stated for this guide, annual tax $6,600 / 12 = $550 and annual homeowners insurance $1,440 / 12 = $120. Add $1,940 + $550 + $120 = $2,610. Other named payment definitions require their own components.
2. A property is worth $475,000 and is secured by a $290,000 first mortgage and a $35,000 second mortgage. What is the owner's dollar equity?
- $290,000
- $325,000
- $185,000
- $150,000
Show answer and explanation
Answer: D. $150,000
Total secured debt is $325,000. Equity is $475,000 - $325,000 = $150,000.
3. A $340,000 loan is made on a property with a required value base of $400,000. What is the LTV?
- 80%
- 117.65%
- 15%
- 85%
Show answer and explanation
Answer: D. 85%
$340,000 / $400,000 = 0.85, or 85% LTV.
4. How much do 1.5 points cost on a $280,000 mortgage?
- $4,200
- $42,000
- $2,800
- $1,867
Show answer and explanation
Answer: A. $4,200
Convert 1.5 points to 0.015, then multiply: $280,000 x 0.015 = $4,200.
5. Which statement correctly distinguishes a discount point from an origination fee?
- A discount point is tied to rate pricing while an origination fee pays for making the loan
- Every percentage-based lender charge must buy a rate reduction
- A point cost of 1% guarantees a one-percentage-point note-rate cut
- Origination fees always use sale price while points always use appraised value
Show answer and explanation
Answer: A. A discount point is tied to rate pricing while an origination fee pays for making the loan
Both charges may use loan amount as the arithmetic base, but their purposes differ.
6. A stated monthly bill has $2,180 P&I plus $750 escrow that already contains $600 tax and $150 homeowners insurance. No other component applies. What is the bill?
- $2,930
- $750
- $3,680
- $2,180
Show answer and explanation
Answer: A. $2,930
Add the supplied P&I and escrow once: $2,930. The $3,680 choice adds the same tax and insurance again.
7. Current property value is $300,000 and stated current secured balances total $325,000. What is gross equity before other adjustments?
- $25,000
- $300,000
- Zero in every case
- Negative $25,000
Show answer and explanation
Answer: D. Negative $25,000
Value minus debt is -$25,000. This arithmetic does not settle private sale proceeds, recovery, tax treatment or approval to borrow.
8. Assume gross equity already equals value less all stated debt, actual sale price equals that value and actual payoffs equal that debt. Gross equity is $210,000 and additional closing costs are $30,000, with no other adjustments. What is the stated net?
- $210,000
- Negative $220,000
- $180,000
- $240,000
Show answer and explanation
Answer: C. $180,000
Subtract only the additional stated costs: $210,000 - $30,000 = $180,000. Do not subtract the debt a second time from an equity amount that already excludes it; real payoffs and costs need their own evidence.
9. Use the stated combined-ratio definition: original first $350,000, closed-end second balance $25,000 and drawn HELOC $15,000, divided by $500,000 value. What is CLTV?
- 70%
- 88%
- 78%
- 85%
Show answer and explanation
Answer: C. 78%
($350,000 + $25,000 + $15,000) / $500,000 = 78%. The unmodified full line belongs in the stated HCLTV calculation, not as an extra current draw.
10. Use the stated HCLTV definition with original first $350,000, closed-end second balance $25,000, an unmodified full HELOC line of $50,000 and $500,000 value. The line has $15,000 drawn. What is HCLTV?
- 78%
- 70%
- 88%
- 85%
Show answer and explanation
Answer: D. 85%
($350,000 + $25,000 + $50,000) / $500,000 = 85%. Do not count both the full line and the same draw; actual program exceptions and permanent changes require their own analysis.
11. Does 100 minus first-mortgage LTV necessarily give all-lien equity percentage?
- Yes, subordinate debts can never matter
- No; the debt set and value base must match
- No, because equity cannot be expressed as a percentage
- Yes, even when the denominators differ
Show answer and explanation
Answer: B. No; the debt set and value base must match
The complement works only with the same debt set and value base. The example's 70% first LTV does not make all-lien equity 30%; current drawn debts leave 22% on the stated snapshot.
12. A problem states a separate 0.75% origination fee on a $360,000 loan. What is that fee?
- $4,500
- $27,000
- $7,200
- $2,700
Show answer and explanation
Answer: D. $2,700
$360,000 x 0.0075 = $2,700. The charge's purpose and actual disclosure category remain distinct from discount points.
13. Does one discount point necessarily lower a note rate by one percentage point?
- No, because a point is always based on sale price
- Yes, the fee percentage fixes the rate cut
- No; one point defines a cost of 1% of the loan, while the actual pricing tradeoff varies
- Yes, under every lender and product
Show answer and explanation
Answer: C. No; one point defines a cost of 1% of the loan, while the actual pricing tradeoff varies
Keep the loan-based cost and actual offered rate separate. No current pricing quote or fixed rate benefit is supplied.
14. Which is accurate about lender credits?
- A credit means there are no underlying closing charges
- A credit can offset closing costs under its actual terms; some credits are unrelated to rate
- Every credit forgives the same amount of principal
- Every credit must be an identical rate tradeoff
Show answer and explanation
Answer: B. A credit can offset closing costs under its actual terms; some credits are unrelated to rate
CFPB distinguishes rate-related credits from other credits. A credit does not by itself prove principal reduction, an all-cost-free loan or the best lifetime outcome.
15. Extra upfront cost is $3,600 and the stated comparable monthly saving is a constant $60. Ignoring other timing and costs, what is simple payback?
- A guaranteed total lifetime benefit
- 6 months
- 60 months
- 216 months
Show answer and explanation
Answer: C. 60 months
$3,600 / $60 = 60 months. The limited model ignores time value, taxes, other costs and sale or refinance effects; it is not a loan recommendation.
16. A stated 1.5-point charge is $4,200. What loan amount produces that charge?
- $630,000
- $2,800
- $280,000
- $420,000
Show answer and explanation
Answer: C. $280,000
$4,200 / 0.015 = $280,000. Use the rate of that same stated charge rather than the purchase price or a different fee.
17. For one stated monthly exercise, the beginning loan balance is $240,000, the annual note rate is 6% and interest uses that rate divided by 12. The supplied P&I payment is $1,500, with no other adjustments. How much reduces principal?
- $1,200
- $14,400
- $300
- $1,500
Show answer and explanation
Answer: C. $300
Interest is $240,000 x 0.06 / 12 = $1,200. The supplied $1,500 P&I leaves $300 principal. The interest-only calculation is not the full amortizing payment, and the stated rate is the note rate rather than APR.
18. Assume a classroom maximum first loan of 80% of the lower of a $425,000 price or $410,000 appraisal, with no other value adjustment. How much of the purchase price is not funded by that first loan?
- $97,000
- $15,000
- $85,000
- $82,000
Show answer and explanation
Answer: A. $97,000
The maximum under the stated formula is $410,000 x 0.80 = $328,000; $425,000 - $328,000 = $97,000. This is the price funding gap, not full cash to close or approval of an actual borrower.
19. Specified charges are $4,500 discount points and $2,700 origination fees. A stated permitted $1,200 general lender credit offsets only this stated subtotal. No other amount is requested. What is the net subtotal?
- $7,200
- $3,300
- $8,400
- $6,000
Show answer and explanation
Answer: D. $6,000
$4,500 + $2,700 - $1,200 = $6,000. This does not identify full cash to close, forgive principal or turn the origination charge into discount points; the listed point charge remains $4,500.
20. For the cited Fannie Mae delivery method only, a positive calculated ratio is 80.009%. First truncate to two decimal places, then round up to a whole percent. What result follows that stated method?
- 80.01%
- 79%
- 81%
- 80%
Show answer and explanation
Answer: D. 80%
Truncation gives 80.00%, so the subsequent whole-percent ceiling is 80%. This is not ordinary rounding to 80.01% followed by a ceiling to 81%, not a universal PSI instruction and not an eligibility or insurance-cancellation approval.
Common questions
What does PITI mean in these examples?
The basic classroom convention here is monthly principal, interest, property tax and homeowners insurance. Read the actual question or named form before including other items. The Loan Estimate payment rows and Fannie Mae qualifying PITIA have their own definitions, including specified mortgage insurance and other costs. Do not turn this basic convention into a universal rule excluding mortgage insurance from every use of the acronym.
How do I convert tax and insurance for monthly PITI?
Divide a stated annual amount by 12, then add the supplied monthly P&I. An amount already monthly stays monthly. In the original example, $7,200 annual tax becomes $600 and $1,800 annual homeowners insurance becomes $150; $2,180 P&I produces $2,930. These are stated allocations, not a forecast of a servicer's actual bill or every qualifying expense.
Does escrow add another tax or insurance expense?
No duplicate expense is created by the collection mechanism. If $750 escrow already contains $600 tax and $150 homeowners insurance, add that $750 once to P&I. If there is no escrow, the underlying expenses do not vanish. Prepaid premiums and initial escrow funding at closing have their own timing; they are not automatically extra full premiums every month.
Is PITI the same as the full lender bill or housing expense?
Use the definition actually requested. The covered Loan Estimate projected-payment table separates P&I, mortgage insurance and estimated escrow, while the taxes, insurance and assessments row can include items not escrowed. A program's qualifying housing expense can use other components, including dues or ground rent under its rules. Direct-paid costs and expenses already in escrow must be identified so the same item is not added twice.
How is current equity different from the original down payment?
For the stated gross-equity convention, subtract current secured balances from current property value, counting each debt once. Original contribution and original loan amount can differ from today's position. Value changes, principal repayment and later secured borrowing can change equity. Unused HELOC capacity is not the same as drawn debt, and equity is not an automatically approved borrowing amount.
Is equity the same as cash from a sale?
No. Actual proceeds use sale price, dated payoffs, costs, credits and adjustments. A displayed principal balance may differ from payoff because interest and other amounts can be due. If starting from an equity amount that already subtracts the debt, do not deduct that debt again. The examples that start from equity expressly assume sale price equals the stated value and payoffs equal the stated debt; actual transactions require their own figures.
What is the correct LTV denominator?
Use the task's required base. The cited Fannie Mae general purchase calculation uses the original note amount divided by the lower of sale price or current appraised value; refinance and special-transaction rules differ, including the identified financed-mortgage-insurance calculation. A later current-balance/current-value estimate is a different task. An LTV result alone is not a finding of eligibility, approval or automatic insurance cancellation.
How do CLTV and HCLTV differ in the worked example?
Under the stated Fannie Mae-style definitions, CLTV uses the original first amount, the closed-end subordinate balance and the drawn HELOC balance. HCLTV instead uses the unmodified full HELOC line in that example, without also adding the same draw. The actual guide has conditions for permanent line changes and an outstanding-balance floor. Do not import one program's definitions into every loan or confuse capacity with current debt for equity.
Does equity percentage always equal 100 minus LTV?
Only when the same value base and debt set are used. With one loan at 80% of that value and no other stated secured balances, the simplified gross equity share is 20%. A first-mortgage LTV can leave out subordinate debt that all-lien equity includes. Equity can also be negative; do not reverse the subtraction or automatically replace a negative result with zero.
How much is a point, including a fractional point?
One point is 1% of the loan amount. On $275,000, one point is $2,750 and half a point is $1,375. Convert 1.5 points to 0.015 before multiplying or dividing. A purchase price, down payment or monthly installment is not automatically the point-cost base. A point percentage also does not prescribe an equal percentage-point reduction in the note rate.
How do discount points differ from origination fees?
CFPB describes origination services as making the loan, including processing, underwriting, funding and administration. A discount point connected to rate pricing serves a different purpose. Both can use a percentage, so the arithmetic alone does not identify the purpose. The word points can be used more broadly on a worksheet; the dedicated points label on covered Loan Estimate and Closing Disclosure forms is tied to a discounted rate. Do not assume every origination charge buys a lower rate.
Are all lender credits tied to a higher rate?
No. CFPB explains the common rate-related tradeoff but also identifies credits unrelated to rate, such as certain offers or compensation for a problem. The actual terms matter. A credit can reduce specified upfront costs without forgiving principal, erasing the underlying charges or proving the lowest overall cost. The examples are not current rate quotes or recommendations to select an offer.
What does a simple discount-point break-even period tell me?
With an explicitly constant monthly saving, divide the extra upfront cost by that saving. The stated $3,600 / $60 calculation gives 60 months. It ignores time value, tax effects, other costs and sale or refinance timing, so it is not a complete economic decision or guarantee of savings. The result depends on the assumptions, not a universal claim about how long every borrower should keep a loan.
What practice score proves that I am ready?
No validated readiness cutoff or pass probability has been established for these original questions. Label the base and units, explain the nearest wrong answer and solve a fresh variation after a delay. The official passing standard, a personal practice target and a measured probability of passing are different things. These are not copied or recalled live PSI questions, and the whole Calculations weight does not assign a quota to each formula.
Do Fannie Mae delivery-rounding rules govern every exam calculation?
No. Follow the question's instruction. The cited Fannie Mae topic says to truncate its ratio to two decimal places, then round up to a whole percent; its examples include 94.01% delivered as 95% and 80.001% delivered as 80%. Lender systems may give the same or a higher result. This named delivery convention is different from ordinary arithmetic rounding and does not waive eligibility, insurance or other requirements. The guide topic is dated June 1, 2022; the observed October 2026 publication date belongs to the wider guide, not a new amendment of that topic.
Can I calculate the full P&I payment as loan balance times annual rate divided by 12?
That can calculate one month's interest under the stated monthly convention, not the full payment that also repays principal. A fully amortizing payment depends on the applicable amount, note rate and amortization term or method; use the actual question's data. In the stated $240,000 at 6% exercise, interest is $1,200; supplied P&I of $1,500 leaves $300 principal. APR includes specified borrowing costs and is not a substitute for the note rate in that interest calculation. No exam-tool permission or actual loan schedule is inferred.
Do all mortgage products use the Loan Estimate and Closing Disclosure?
No. CFPB identifies exceptions, including reverse mortgages, HELOCs, certain loans not secured by real estate and certain homebuyer-assistance loans. Use the disclosure rules that actually cover the transaction. On covered forms, the dedicated points label is connected to a discounted interest rate; a percentage origination fee has its own purpose. The guide does not audit every fee tolerance, changed circumstance, tax deduction or disclosure rule, and the presence of one listed charge does not establish all closing costs.
How do I reverse-solve a loan or distinguish the price gap from cash to close?
Divide a stated percentage-based charge by its decimal rate to recover the loan amount; divide a loan by its decimal LTV to recover the required value base. For a stated maximum-loan calculation, multiply that value base by the allowed ratio. In the $425,000 price and $410,000 appraisal example at 80%, the first-loan amount is $328,000 and the price gap is $97,000. Full cash to close also depends on applicable costs, deposits, credits, financing allocations and other adjustments. That price gap is not automatically the borrower's final personal cash requirement or the formal figure on every disclosure.
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Official sources and scope
Reviewed October 28, 2026 against the identified PSI outline, CFPB explanations and regulation passages, and Fannie Mae guide topics. Fresh primary readings and earlier actual readings are recorded separately. The figures are classroom examples, not current mortgage offers, tax advice or approvals. Fannie Mae policy examples are identified by scope; no universal lending, insurance-cancellation or exam-tool rule is inferred.
- PSI Illinois Candidate Information Booklet: National XI calculations
- CFPB: PITI definition and escrow collection
- CFPB: P&I versus total monthly payment
- CFPB: mortgage paydown and amortization
- CFPB Loan Estimate explainer: payment and separately paid items
- Fannie Mae B3-6-03: qualifying monthly housing expense
- CFPB: mortgage note rate and APR
- CFPB: loan-to-value and mortgage costs
- Fannie Mae B2-1.2-01: LTV definitions and delivery rounding
- Fannie Mae B2-1.2-02: combined loan-to-value
- Fannie Mae B2-1.2-03: full HELOC exposure and permanent modifications
- CFPB: discount points, lender credits and actual pricing
- CFPB Regulation Z 1026.37: payment components, origination points and credits
- CFPB: home equity and home-equity loans
- CFPB: payoff amount versus current mortgage balance
- CFPB: loan amount, rate and term in mortgage payments
- CFPB: mortgage origination services and fees
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.