(2) Fill in the second sheet (titled underwriting).

Where it says Income Test, compute the biggest mortgage payment Ann can make given her NOI in 2015 computed above.

Recall from slides 12: NOIPMT 1.20 , which implies the maximum PMT=NOI1.20 .

(2.a) What is the biggest mortgage payment the bank will allow Ann to make given her expected NOI in 2015?

Using the maximum payment, compute the maximum loan Ann can get.

Recall for an IO loan: PMT=interest rateLoan Balance

The interest rate is given in the spreadsheet. Use the PMT computed in (2.a)

(2.b) What is the maximum loan amount corresponding to a DSCR of 1.2?

(2.c) What is the biggest loan Ann can get with a $1,400,000 down payment and 95% maximum LTV?

NOTE: you may use the formula Maximum Loan = ((LTV)/(1-LTV))*Down payment.

(2.d) Assume for the rest of the question that Ann will make a $1,400,000 down payment. How much will Ann need to borrow?

(2.e) What will Anns annual debt service payment be?

Inputs
Annual Interest Rate	5.75%	IO loan, 5-year balloon	Income Test
Minimum DSCR	1.20		Maximum Annual Mortgage Payment
Maximum LTV	95%		Maximum Loan Amount
Downpayment	$1,400,000.00
Asking Price	$11,822,261.54		Collateral Test
NOI 2015	$768,447.00		Maximum Loan Amount w/ downpayment
			Both tests
			Maximum Loan Amount
			Debt Service Payment
			Ann makes a $1,400,000 down-payment
			Loan amount to buy the property
			Debt Service Payment