CMPS Client Assessment & Loan Structuring 4

Question 1

A client is deciding between a 20% down payment (avoiding PMI) and a 10% down payment (keeping cash for investments). What framework should a CMPS use to guide this decision?

Accepted Answer

Compare the after-tax cost of PMI against the expected return on retained invested capital

Answer

Always recommend 20% down to eliminate PMI costs

Answer

Recommend 10% down to preserve liquidity at all times

Answer

Advise the client to split the difference at 15% down

Question 2

What does a borrower's 'residual income' represent, and why is it relevant in mortgage planning?

Accepted Answer

Monthly income left after all debt obligations, used by VA loans as a secondary qualification measure

Answer

Income remaining after all taxes are withheld

Answer

The borrower's investment portfolio income

Answer

Net income after subtracting the proposed mortgage payment only

Question 3

A client is purchasing a second home and plans to rent it out occasionally. Which loan program is appropriate if the property will be owner-occupied for part of the year?

Accepted Answer

Second home conventional mortgage

Answer

Investment property loan at higher rates

Answer

FHA primary residence loan

Answer

Commercial real estate loan

Question 4

Which scenario requires the mortgage planner to complete a written Benefit to Borrower analysis?

Accepted Answer

A refinance transaction to ensure the new loan provides a tangible net benefit over the existing loan

Answer

Any first-time homebuyer application

Answer

All VA loan applications

Answer

Purchase transactions with down payments below 10%

Question 5

A client wants to pay off their mortgage in 20 years but cannot afford a 20-year loan payment. What strategy should the planner suggest?

Accepted Answer

Take a 30-year loan and make additional principal payments equivalent to a 20-year schedule

Answer

Lock in a 20-year fixed-rate loan regardless of payment

Answer

Choose a 15-year loan and use forbearance if payments become difficult

Answer

Opt for a balloon mortgage due in 20 years

Question 6

What is the effect of discount points on a mortgage, and when should a planner recommend them?

Accepted Answer

Points are prepaid interest that lower the rate, recommended when the break-even period falls within the client's planned ownership horizon

Answer

Points increase the rate and should be avoided

Answer

Points reduce the loan balance directly and always save money

Answer

Points are fees paid to the real estate agent at closing

Question 7

A borrower has a 580 credit score. Which loan program offers the lowest minimum down payment requirement at that score?

Accepted Answer

FHA loan

Answer

Conventional 97 loan

Answer

VA loan

Answer

USDA loan