Practice Test Geeks(CRU) Certified Residential Underwriter Practice Test
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Financial Analysis & Planning Flashcards

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  1. Which of the following IRS forms is used to report a borrower's share of income, deductions, and credits from a partnership?

    Answer: Schedule K-1 (Form 1065)

    Schedule K-1 from Form 1065 reports each partner's distributive share of partnership income, deductions, and credits.

  2. A borrower earns $4,000/month base salary and $800/month in documented child support for the past 12 months expected to continue 3 more years. What is the total qualifying income?

    Answer: $4,800

    Child support received for at least 12 months and expected to continue at least 3 years may be counted as qualifying income, giving $4,000 + $800 = $4,800.

  3. What is the primary purpose of a 'stress test' or sensitivity analysis in financial planning for a mortgage applicant?

    Answer: To evaluate how changes in interest rates or income would affect the borrower's ability to repay

    Stress testing models adverse scenarios — such as rate increases or income drops — to gauge repayment resilience.

  4. Under Fannie Mae guidelines, which of the following is typically added back to a self-employed borrower's net income?

    Answer: Depreciation expense

    Depreciation is a non-cash deduction that reduces taxable income but not actual cash flow, so it is added back to calculate qualifying income.

  5. A borrower's proposed PITI is $1,800 per month and gross monthly income is $5,400. What is the housing expense ratio (front-end DTI)?

    Answer: 33%

    Housing expense ratio = $1,800 / $5,400 = 33.3%, typically rounded to 33%.

  6. When a borrower has co-signed on another person's loan, how is that obligation typically treated in the borrower's DTI calculation?

    Answer: Included unless 12 months of on-time payment history by the primary borrower can be documented

    Co-signed debts are included in DTI unless the borrower can show the primary obligor has made payments for at least 12 months.

  7. Which financial ratio measures a borrower's ability to meet short-term obligations using only the most liquid assets?

    Answer: Quick ratio (acid-test ratio)

    The quick ratio excludes inventory and less-liquid assets, measuring whether liquid assets alone cover short-term liabilities.