CeMAP The Mortgage Application Process 2

Question 1

What does the term 'Agreement in Principle' (AIP) confirm to a borrower?

Accepted Answer

The lender is likely to lend a specified amount subject to full application

Answer

An AIP (also called a Decision in Principle) is a conditional indication that the lender would consider lending a stated amount, but is not a formal mortgage offer.

Question 2

Which document must a mortgage adviser provide to the client before making a personal recommendation?

Accepted Answer

Initial Disclosure Document

Answer

The Initial Disclosure Document (IDD) must be provided at the outset of the sales process before a personal recommendation is made, disclosing the adviser's status and services.

Question 3

A client earns £45,000 per year. Using a standard income multiple of 4.5x, what is the maximum loan most lenders would consider?

Accepted Answer

£202,500

Answer

4.5 multiplied by £45,000 equals £202,500, which is the maximum loan based on a 4.5x income multiple.

Question 4

What is the primary purpose of a Mortgage Valuation Report?

Accepted Answer

To confirm the property is suitable security for the lender's loan

Answer

A mortgage valuation is carried out for the lender's benefit to confirm the property provides adequate security for the loan amount requested.

Question 5

Under MCOB rules, how long is a lender required to keep a mortgage offer open once issued?

Accepted Answer

The lender sets its own validity period

Answer

MCOB does not prescribe a minimum validity period for mortgage offers; lenders set their own timeframes, typically 3–6 months.

CeMAP - Certificate in Mortgage Advice and Practice Practice Test

CeMAP - Certificate in Mortgage Advice and Practice Practice Test

CeMAP The Mortgage Application Process 2