CRU Underwriting Decision-Making & Loan Approval 2 — Questions and Answers
Question 1: A borrower's file shows a 12-month history of on-time payments but a prior 120-day late from 3 years ago. How should the underwriter handle this?
- Deny the loan automatically due to the 120-day late
- Consider the late as a major derogatory and require a written explanation (Correct answer)
- Ignore the late since it is beyond the 24-month lookback window for all agencies
- Approve without conditions since the recent history is clean
Correct answer: Consider the late as a major derogatory and require a written explanation
A 120-day late is a major derogatory event that requires a written explanation and compensating factors even when it falls outside the standard 24-month window.
Question 2: Which of the following is considered an acceptable source of funds for a down payment under conventional guidelines?
- An unsecured personal loan from a bank
- A cash advance on a credit card
- A gift from the borrower's employer
- A documented withdrawal from a retirement account (Correct answer)
Correct answer: A documented withdrawal from a retirement account
Documented withdrawals from retirement accounts are an acceptable source of down payment funds under Fannie Mae and Freddie Mac guidelines.
Question 3: An underwriter is reviewing a self-employed borrower who shows $80,000 in net income on Schedule C but added back $15,000 in depreciation. What is the qualifying income?
- $80,000
- $65,000
- $95,000 (Correct answer)
- $15,000
Correct answer: $95,000
Depreciation is a non-cash deduction and must be added back to Schedule C net income, yielding $80,000 + $15,000 = $95,000.
Question 4: Under FNMA guidelines, what is the maximum seller concession allowed on a primary residence purchase with an 85% LTV?
- 3%
- 4%
- 6% (Correct answer)
- 9%
Correct answer: 6%
Fannie Mae allows seller concessions up to 6% of the sales price for primary residence loans with LTV above 75% and up to 90%.
Question 5: A borrower has $500 in monthly student loan payments currently in deferment. How must the underwriter treat this debt for FHA loans?
- Exclude the payment since the loan is deferred
- Use 0.5% of the outstanding balance as the monthly obligation
- Use 1% of the outstanding balance as the monthly obligation (Correct answer)
- Use the fully amortized payment from the loan agreement
Correct answer: Use 1% of the outstanding balance as the monthly obligation
FHA guidelines require the underwriter to use 1% of the outstanding student loan balance as the monthly payment when the loan is in deferment.
Question 6: What is the primary purpose of a Transmittal Summary (Form 1008) in the underwriting process?
- To document the property's appraised value
- To summarize the underwriting decision and key loan data for investor review (Correct answer)
- To capture the borrower's signed authorization for credit pulls
- To record the title commitment and lien search results
Correct answer: To summarize the underwriting decision and key loan data for investor review
Form 1008 is a transmittal summary that compiles key loan data, borrower information, and the underwriter's decision for secondary market review.
Question 7: A borrower receives a base salary of $60,000 and an annual bonus of $12,000 consistently paid for the last 2 years. What monthly income should be used for qualifying?
- $5,000
- $5,500 (Correct answer)
- $6,000
- $4,500
Correct answer: $5,500
The $12,000 bonus is documented for 2 years and can be averaged, adding $1,000/month to the $5,000 base for a total of $5,500.
CRU Underwriting Decision-Making & Loan Approval 2
A borrower's file shows a 12-month history of on-time payments but a prior 120-day late from 3 years ago.
How should the underwriter handle this?