solution

An applicant is requesting a 10 years housing loan of $100,000, current mortgage rate is 5%. The principal and interest payments are due from year one. The applicant lists the following information on the loan application:

Weight% Score

1. Annual income: $60,000 20%
2. Relations with banks: None 5%
3. Major credit cards: One 10%
4. Age: 35 5%
5. Annual debt service ratio 0% 40%

before the loan

1. Deposit Accounts held: Demand deposit 10%
2. Occupation: Professional 10%

The weights for the credit scoring system are given. You are requested to plug in your assessment of the appropriate scores to the various factors listed in the loan application. You need to find the debt service ratio and give it a score, which together with the other scores would help you make a decision whether to accept or decline the housing loan application.