CRU Financial Analysis & Planning 2

Question 1

A borrower's gross monthly income is $7,500 and total monthly debt obligations are $2,850. What is the total debt-to-income (DTI) ratio?

Accepted Answer

38%

Answer

DTI = $2,850 / $7,500 = 0.38, or 38%.

Question 2

Which document is the primary source used to verify a self-employed borrower's net income for underwriting purposes?

Accepted Answer

Federal tax returns (Form 1040)

Answer

Federal tax returns are the standard documentation used to verify self-employed income because they reflect IRS-reported figures.

Question 3

What is 'compensating factors' in residential underwriting?

Accepted Answer

Positive elements that offset risk when a borrower exceeds standard guidelines

Answer

Compensating factors are strengths such as large reserves or low LTV that allow approval despite guideline exceptions.

Question 4

When calculating qualifying income for a salaried borrower who also receives overtime, underwriters typically require overtime to be documented for at least how long?

Accepted Answer

Two years

Answer

Fannie Mae and Freddie Mac generally require a two-year history of overtime before it can be counted as qualifying income.

Question 5

A property's net operating income (NOI) is $18,000 per year and the annual debt service is $15,000. What is the debt service coverage ratio (DSCR)?

Accepted Answer

1.20

Answer

DSCR = NOI / Debt Service = $18,000 / $15,000 = 1.20.

(CRU) Certified Residential Underwriter Practice Test

(CRU) Certified Residential Underwriter Practice Test

CRU Financial Analysis & Planning 2