Underwriting Decision-Making & Loan Approval Flashcards
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Read the first 7 Underwriting Decision-Making & Loan Approval flashcards as text
A borrower is purchasing a second home and wants to finance 90% of the purchase price. Which statement is correct under conventional guidelines?
Answer: Second home purchases are allowed up to 90% LTV under standard FNMA guidelines
Fannie Mae allows up to 90% LTV on second home purchases, though mortgage insurance is required above 80% LTV.
When evaluating an automated underwriting system (AUS) finding of 'Refer/Eligible', what is the underwriter's correct course of action?
Answer: Manually underwrite the loan following agency manual underwriting guidelines
A Refer/Eligible finding means the AUS could not approve the loan but it may be eligible if manually underwritten to agency guidelines.
Which of the following income types requires a 2-year history AND a likelihood of continuance to be included in qualifying income?
Answer: Overtime and part-time income
Overtime and part-time income require a documented 2-year history and reasonable expectation of continuance before they may be used for qualification.
An underwriter notes that the borrower's bank statements show large, unexplained deposits in the 60 days before application. What is the required action?
Answer: Require the borrower to document and source all large deposits
Agency guidelines require borrowers to document and provide a paper trail for large, unexplained deposits appearing in bank statements used for asset verification.
What is the maximum allowable DTI for a manually underwritten FHA loan with no compensating factors?
Answer: 31% / 43%
FHA manual underwriting without compensating factors limits front-end DTI to 31% and back-end DTI to 43%.
A non-occupant co-borrower is added to a conventional loan to supplement qualifying income. Which guideline restriction typically applies?
Answer: LTV may be capped at 90% when non-occupant co-borrower income is needed to qualify
Fannie Mae limits LTV to 90% on transactions where a non-occupant co-borrower's income is required to meet qualifying ratios.
Which document is the primary tool used to verify a salaried borrower's current employment and income during the underwriting process?
Answer: Verification of Employment (VOE)
A Verification of Employment (VOE) confirms the borrower's current position, start date, and year-to-date earnings directly from the employer.