| Course | MT431 Real Estate Finance and Ethics |
|---|---|
| Unit | Unit 4 |
| Paper type | Borrower qualification worksheet |
| Length | About 920 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for MT431 Unit 4
31.7 and 41.3 Percent: An MT431 Unit 4 Borrower Qualification Worksheet Tested Against Federal Rules
[Student Name]
Purdue University Global
MT431: Real Estate Finance and Ethics
Unit 4 Borrower Qualification Worksheet
[Instructor Name]
[Date]
Andre and Keisha Morgan and their figures are composite; income rules follow the cited agency guide, the average prime offer rate is a bracketed placeholder for the week of rate lock, and the sources cited are real.
Section 1: Qualifying Income
Andre Morgan earns a salary of $71,500 a year, which is $5,958.33 a month. His employer verified two years of continuous employment, so the full salary counts.
Keisha Morgan works an average of 36 hours a week at $27.25 an hour. Hourly income is converted to a monthly figure by multiplying the hourly rate by weekly hours, then by 52 weeks, and dividing by 12: $4,251.00 a month.
Keisha also earns overtime, which has declined. She earned $4,300 of overtime two years ago and $2,620 last year. Agency guidelines allow overtime with a two-year history, but when it is declining, the lender should use the lower, current amount rather than an average and confirm the decline has stabilized (Fannie Mae, 2025). Averaging the two years would give $3,460 a year, or $288.33 a month, and overstate what she can rely on. The worksheet uses last year's $2,620, or $218.33 a month.
Total qualifying income is $10,427.66 a month.
Section 2: Proposed Housing Payment
The purchase price is $445,000, with 10 percent down, $44,500, and a loan of $400,500 at 6.625 percent for 30 years. Principal and interest are $2,564.45 a month. Property taxes add $445.00, based on the county's current bill for the property. Homeowners insurance adds $142.00. Mortgage insurance, required because the loan exceeds 80 percent of value, adds $152.78. The full housing payment is $3,304.23.
A payment limited to principal and interest would understate the housing cost by $739.78 a month, and the front-end ratio would fall to 24.6 percent, which is why all four components belong in it.
Section 3: Recurring Debts
Monthly debts total $1,001. Andre's car loan requires $486 a month with 14 payments remaining. Keisha's student loan requires $315. Minimum payments on two credit cards total $200. The car loan is included because more than ten payments remain; an installment debt that will be paid off within ten months may be left out of the ratio under the agency guide, but this one does not qualify.
Section 4: Ratios and Results
The front-end ratio, housing payment divided by income, is $3,304.23 divided by $10,427.66, or 31.7 percent.
The back-end ratio, housing payment plus recurring debts divided by income, is $4,305.23 divided by $10,427.66, or 41.3 percent.
The loan-to-value ratio is $400,500 divided by $445,000, or 90 percent.
Reserves after closing total $15,530 in checking and savings, which covers 4.7 months of the full housing payment.
Counting Keisha's overtime at its average rather than its lower current level would raise income by $70 a month and hide a decline the lender is required to weigh.
Section 5: Ability-to-Repay Factors
Regulation Z requires a creditor to make a reasonable, good-faith determination that the borrower can repay, considering eight factors (Minimum standards for transactions secured by a dwelling, 2025). Each is checked in turn.
Current income and assets are verified through pay stubs, W-2 forms and bank statements. Employment status is verified for both borrowers. The monthly payment on the loan is computed at the note rate and fully amortizing, $2,564.45. There is no simultaneous second loan. Mortgage-related obligations, the taxes, insurance and mortgage insurance, are included at $739.78. Current debt obligations total $1,001. The debt-to-income ratio is 41.3 percent. Credit history shows no late payments in the past two years for either borrower.
The rule sets no single ratio that must be met; it requires that the factors be considered and documented.
Section 6: General QM Price Test
A loan that meets the qualified mortgage definition receives a presumption of compliance with the ability-to-repay rule. Since the General QM revisions, the definition rests mainly on price rather than on a 43 percent ratio cap. For a first-lien loan of this size, the loan's APR must not exceed the average prime offer rate for a comparable transaction by 2.25 percentage points or more. The loan's APR is 6.81 percent. The average prime offer rate for the week of rate lock is [6.21] percent, a spread of [0.60] points, well inside the limit. The loan also has a 30-year term, no negative amortization, no interest-only period and points and fees under the regulatory cap, so it meets the product requirements.
When the Consumer Financial Protection Bureau (2020) replaced the 43 percent ratio limit with the price-based test, it explained that pricing captures a borrower's risk more fully than a single ratio. Under the earlier rule this file, at 41.3 percent, would have passed with little margin; under the price-based definition the ratio is a factor the lender weighs, not a bright line.
Section 7: Underwriter's Summary
The file qualifies. Income is documented and counted conservatively, the full housing payment is in the ratios, the back-end ratio is within the range most investors accept with 4.7 months of reserves, and the loan meets the General QM price and product tests. The one point to watch is Keisha's declining overtime; a further drop would lower qualifying income by up to $218.33 a month and raise the back-end ratio to about 42.2 percent, which would still qualify.
References
Consumer Financial Protection Bureau. (2020). Qualified mortgage definition under the Truth in Lending Act (Regulation Z): General QM loan definition. Federal Register, 85(248), 86308-86400.
Fannie Mae. (2025). Selling guide: Fannie Mae single family. https://selling-guide.fanniemae.com/
Minimum standards for transactions secured by a dwelling, 12 C.F.R. ยง 1026.43 (2025).
MT431 Unit 4 instructions, in plain terms
Unit 4 asks students to qualify a borrower for a mortgage and test the file against federal rules. Instructors expect income built item by item from documented sources, with rules applied to variable income such as overtime or bonuses. Declining income should be counted at its lower current level, not averaged. The housing payment must include taxes, homeowners insurance and any mortgage insurance, not principal and interest alone. Recurring debts should be listed with any that can be excluded identified and justified. The front-end and back-end ratios, loan-to-value and reserves are the usual results. Most sections then ask for the ability-to-repay factors in Regulation Z and the qualified mortgage tests, with dated rules and sources. A worksheet layout with one section per question is typical.
Inside the MT431 Unit 4 example
The sample builds income in three lines, converting hourly pay to a monthly figure and explaining why overtime is counted at the lower level, after the Fannie Mae guide. The housing payment is itemized and the effect of leaving out its non-loan parts is shown. Debts are listed with the ten-month exclusion rule applied to the car loan. Ratios, loan-to-value and reserves sit in a results section, under a highlighted line on what averaging the overtime would hide. The ability-to-repay section checks all eight factors in turn. The General QM section applies the price test and the product limits, and notes the 2020 change from a ratio limit. An underwriter's summary stresses the weakest income line.
Reading the MT431 Unit 4 grading rubric
Qualification worksheets in MT431 earn their heaviest marks on income handling. Averaging a declining overtime figure, or counting it without two years of history, overstates capacity and is marked down even when the ratios pass. Rubrics then check the housing payment for taxes, insurance and mortgage insurance. Credit goes to correct treatment of debts near payoff. Ratios, loan-to-value and reserves should be computed correctly and shown with their inputs. Testing the file against the ability-to-repay factors, rather than naming them, earns compliance marks. Applying the General QM price test with a dated benchmark rate shows current knowledge. A clear worksheet format, with one section per question, and citations of the regulation and the agency guide complete the expectations.
MT431 Unit 4 help from the desk
The most common weak worksheet averages two years of overtime, or counts only the higher year, without noting the decline. Another frequent error uses principal and interest as the housing payment, which makes the front-end ratio look about seven points better here. Students often include or exclude a car loan without stating the rule. Many cite a 43 percent ratio limit for qualified mortgages, a rule replaced by the price-based definition. The ability-to-repay factors are often listed but not applied to the file. Before submitting, recompute your back-end ratio with the variable income removed entirely. If the file would fail, say so in the summary, because that is the risk the underwriter is accepting.
Get an MT431 Unit 4 example written to your instructions
The Unit 4 borrower file is what matters here: incomes, debts, the price and the proposed loan, plus the rubric and any lender limits the case names. A free first worksheet comes back within 24-48h, showing each ratio's inputs, flagging income that needs a documented history, and dating every regulatory statement it relies on. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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MT431 Unit 4 questions, answered
Is 43 percent still the maximum debt-to-income ratio?
Not under federal law for General QM loans. The CFPB replaced that fixed ceiling with a pricing test in a 2020 rule, mandatory since October 1, 2022, though lenders must still consider and verify debt-to-income or residual income. Loan programs and individual lenders set their own limits, so a case may name 43, 45 or 50 percent; use whichever your prompt specifies.
What counts in the front-end ratio?
The full proposed housing payment: principal, interest, property taxes, homeowners insurance, mortgage insurance and any association dues, divided by gross monthly income. The back-end ratio adds recurring debts such as car, student loan and minimum card payments. Utilities, groceries and child care are generally excluded, even though they affect what a household can really afford.
How is variable income treated on the MT431 worksheet?
Most guidelines want a two-year history for overtime, bonus or commission income and look at the trend. Stable or rising income is usually averaged; declining income may be counted at the lower recent figure or excluded until it stabilizes. Say which rule the case lender applies, document the years used, and show the ratio both with and without that income.
Where can I find a free MT431 Unit 4 sample paper?
The complete MT431 Unit 4 worksheet is here, qualifying a composite couple for a $400,500 loan and testing it against Regulation Z.
Why is the overtime in the MT431 Unit 4 sample not averaged?
It fell from $4,300 to $2,620 over two years, and the agency guide calls for the lower current figure when overtime is declining.