Practice Test Geeks(CRU) Certified Residential Underwriter Practice Test
← All CRU Flashcard Decks

Financial Analysis & Planning Flashcards

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

Read the first 7 Financial Analysis & Planning flashcards as text

  1. A borrower's PITI is $1,500/month and gross monthly income is $6,000. Including $400/month in minimum credit card payments and a $300/month car loan, what is the back-end DTI?

    Answer: 37%

    Back-end DTI = ($1,500 + $400 + $300) / $6,000 = $2,200 / $6,000 = 36.67%, approximately 37%.

  2. What does 'effective income' mean in the context of mortgage underwriting?

    Answer: Income that is stable, recurring, and likely to continue for at least three years

    Effective income refers to income that is reliable, verifiable, and has a reasonable expectation of continuance for underwriting purposes.

  3. Which scenario best illustrates a 'non-recurring income' item that would typically be excluded from qualifying income?

    Answer: A one-time legal settlement received the prior year

    One-time legal settlements are non-recurring and cannot be relied upon to continue, so they are excluded from qualifying income.

  4. In underwriting, what is the significance of a 'large deposit' appearing in a borrower's bank statements?

    Answer: It requires sourcing and documentation to ensure funds are not borrowed and are acceptable for use in the transaction

    Large unexplained deposits must be sourced to confirm the funds are not undisclosed borrowed funds that would affect the DTI.

  5. A borrower who is 100% commission-based must typically provide what documentation to support income continuity?

    Answer: Two years of federal tax returns plus a current year-to-date earnings statement

    Commission income is variable and requires two years of tax returns and a current YTD statement to establish a history and trend.

  6. What is the primary risk to a lender when a borrower's DTI ratio significantly exceeds conventional guidelines without strong compensating factors?

    Answer: Increased likelihood of default due to insufficient cash flow to meet obligations

    High DTI indicates the borrower has limited income cushion, making default more probable if any financial disruption occurs.

  7. Which of the following retirement income sources is considered most stable for underwriting purposes?

    Answer: Monthly pension benefit from a defined benefit plan

    Defined benefit pension payments are fixed and guaranteed for life, making them the most predictable and stable retirement income source.