CHCP Mortgage Processing & Underwriting 4

Question 1

What is the 'seasoning' requirement for funds used in a down payment on most conventional loans?

Accepted Answer

Funds must be in the account for 60 days

Answer

Conventional guidelines generally require down payment funds to be seasoned — present in the borrower's account — for at least 60 days, avoiding the need to source deposits older than 60 days.

Question 2

In mortgage underwriting, what does the term 'compensating factor' refer to?

Accepted Answer

A positive element that offsets a risk factor or allows an exception to a guideline

Answer

A compensating factor is a strength in a loan file (such as high reserves, low LTV, or stable employment) that can offset a weakness and support guideline exceptions.

Question 3

Which ratio measures only housing costs (PITI) against gross monthly income?

Accepted Answer

Front-end ratio

Answer

The front-end ratio (or housing ratio) compares only PITI (principal, interest, taxes, insurance) to gross monthly income.

Question 4

Under FHA guidelines, what is the maximum front-end DTI ratio typically allowed?

Accepted Answer

31%

Answer

FHA guidelines set a standard front-end ratio limit of 31%, though exceptions may be granted with compensating factors.

Question 5

A property appraisal comes in $15,000 below the purchase price. How does this typically affect underwriting?

Accepted Answer

The loan is based on the appraised value, requiring the borrower to cover the shortfall

Answer

Lenders base the loan on the lower of the purchase price or appraised value, so a low appraisal means the borrower must make up the difference with additional cash.

(CHCP) Certified Home Closing Professional Practice Test

(CHCP) Certified Home Closing Professional Practice Test

CHCP Mortgage Processing & Underwriting 4