CMPS Debt and Cash Flow Management 5

Question 1

Which scenario best illustrates positive cash flow leverage in mortgage planning?

Accepted Answer

Using a longer loan term to lower payments, freeing cash for higher-return investments

Answer

Positive cash flow leverage means using a lower payment structure to redirect surplus cash toward higher-yielding opportunities.

Question 2

A borrower has a 45% back-end DTI but strong compensating factors. Under FHA guidelines, what compensating factor can support approval above the standard 43% threshold?

Accepted Answer

Three months of mortgage payment reserves

Answer

FHA allows higher DTI ratios when compensating factors such as three months' reserves are documented.

Question 3

What is the relationship between a borrower's credit utilization rate and their available cash flow for mortgage qualification?

Accepted Answer

High utilization increases minimum payments, raising DTI and reducing qualifying power

Answer

High credit utilization increases minimum required payments on revolving accounts, which raises back-end DTI and reduces the mortgage amount a borrower can qualify for.

Question 4

A CMPS client is considering early retirement and wants to use home equity to fund living expenses. Which product is most appropriate if they need ongoing monthly income?

Accepted Answer

Reverse mortgage with monthly payment option

Answer

A reverse mortgage with the monthly payment (tenure) option provides guaranteed monthly income for as long as the borrower lives in the home.

Question 5

When structuring a mortgage for a client with irregular income (e.g., commission-based), what cash flow strategy should the CMPS prioritize?

Accepted Answer

Choosing a payment structure with maximum flexibility and maintaining a larger cash reserve

Answer

Irregular income earners benefit from flexible payment options and robust cash reserves to cover low-income months without risking default.

(CMPS) Certified Mortgage Planning Specialist Practice Test

(CMPS) Certified Mortgage Planning Specialist Practice Test

CMPS Debt and Cash Flow Management 5