Practice Test Geeks(CMA) Certified Mortgage Advisor Practice Test
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Loan Origination Process Flashcards

7 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Loan Origination Process flashcards as text

  1. What does the acronym 'AUS' stand for in mortgage underwriting, and what is its primary function?

    Answer: Automated Underwriting System — electronically evaluates loan eligibility based on borrower data

    An Automated Underwriting System (such as Fannie Mae's DU or Freddie Mac's LPA) electronically evaluates loan data and issues a risk assessment recommendation (Approve/Eligible, Refer, etc.).

  2. A borrower's Loan Estimate shows an APR of 6.85% on a loan with a note rate of 6.50%. Why is the APR higher than the note rate?

    Answer: APR includes fees and costs of credit spread over the loan term, making it higher than the note rate

    The APR is higher than the note rate because it incorporates finance charges (origination fees, points, mortgage insurance) spread over the loan's life, giving a true cost of credit measure.

  3. During origination, a loan officer identifies that a borrower's self-employed income shows significant variance between tax years. What is the standard approach to calculate qualifying income?

    Answer: Average the two most recent years' net income from Schedule C or corporate returns

    Agency guidelines (Fannie Mae/Freddie Mac) require a two-year average of self-employed income as documented on tax returns, with some exceptions if income is declining.

  4. What is the maximum allowable seller concession on a conventional loan with an LTV above 90%?

    Answer: 3% of the sales price

    Fannie Mae and Freddie Mac limit seller concessions to 3% of the lesser of the sales price or appraised value when LTV exceeds 90%.

  5. Which of the following scenarios would most likely trigger a revised Loan Estimate (re-disclosure) under TRID?

    Answer: A valid changed circumstance such as the borrower switching from a fixed-rate to an ARM product

    Under TRID, a revised Loan Estimate may be issued when a valid changed circumstance occurs, such as a product change, natural disaster, or new information that increases settlement charges.

  6. What is the purpose of 'flooding determination' during the loan origination process?

    Answer: To determine whether the subject property is in a FEMA Special Flood Hazard Area requiring flood insurance

    A flood zone determination identifies whether the property lies in a FEMA-designated Special Flood Hazard Area, which requires the borrower to purchase flood insurance as a loan condition.

  7. A borrower is purchasing a home and has a DTI of 47%. Which loan type most commonly allows DTIs this high through automated underwriting?

    Answer: FHA-insured loan

    FHA loans, when receiving an AUS 'Approve/Eligible,' can accommodate DTIs up to 50% or higher in some cases, making them the most common choice for higher DTI borrowers.