Use the following information to answer the questions below:
Jessie is a lending officer at the local community bank that lends to both residential and commercial borrowers. She is well-versed in both lending areas. For residential mortgages, she is most concerned with Loan-to-Value (LTV) and Debt-to-Income (DTI) ratios. For commercial loans, she looks at LTV, Loan-to-Cost (LTC), Debt Service Coverage Ratio (DSCR), and Debt Yield. The community bank’s underwriting standards are as follows:

Residential
LTV – 80% maximum, 75% for refinance
DTI – 40% maximum; 33% maximum for self-employed.

Commercial
LTV – 55% maximum
LTC –65% maximum
DSCR –1.25x minimum
Debt Yield – 8% minimum

Brian Schwartz is a local real estate developer. He is working with Jessie to finance both a house he is purchasing and a well-located unanchored retail center he is developing. The current residential mortgage rates are 7.125% for 30-years and 6.875% for 15-years.
Brian’s house is located in an established first-ring neighborhood with increasing property values. The house is appraised at $850,000. The unanchored retail center will be located in the same neighborhood. The five tenants, including Starbucks Coffee, have all signed Letter-of-Intents (LOIs). The budgeted cost to build the retail center is $20000,000 and is being built to an 8% cap rate according to Brian’s underwriting.

1. Jessie first underwrites Brian’s house. Brian is going to put a $225,000 down payment on the house. What is the LTV for this mortgage? Does this meet the community bank’s LTV underwriting standard?