FREE Mortgage Underwriting Guidelines & Ratios Questions and Answers

Question 1

An underwriter is reviewing a loan application and notes that the borrower's total monthly debt payments (including the proposed mortgage payment, car loan, and credit card minimums) amount to $2,500.
The borrower's gross monthly income is $6,000.
What is the borrower's back-end debt-to-income (DTI) ratio?

Accepted Answer

41.67%

Answer

33.33%

Answer

25.00%

Answer

50.00%

Question 2

Which of the following is typically a key factor considered in an underwriter's evaluation of a borrower's capacity to repay a mortgage loan?

Accepted Answer

The borrower's debt-to-income ratios and employment stability.

Answer

The borrower's current liquid assets for down payment and reserves.

Answer

The condition and appraised value of the subject property.

Answer

The borrower's credit score and payment history on previous debts.

Question 3

A loan program has a maximum allowable front-end debt-to-income (DTI) ratio of 28% and a maximum back-end DTI ratio of 36%. A borrower has a gross monthly income of $5,000, a proposed housing payment (PITI) of $1,300, and other monthly debts totaling $300. Which statement is true regarding this borrower's eligibility based on DTI ratios?

Accepted Answer

The borrower meets the front-end DTI but exceeds the back-end DTI.

Answer

The borrower meets both DTI requirements.

Answer

The borrower exceeds the front-end DTI but meets the back-end DTI.

Answer

The borrower exceeds both DTI requirements.

Question 4

In the context of mortgage underwriting, what is the primary purpose of 'loan-to-value' (LTV) limits within underwriting guidelines?

Accepted Answer

To protect the lender against potential losses in case of borrower default and property foreclosure.

Answer

To ensure the borrower can afford the monthly mortgage payments.

Answer

To verify the borrower's creditworthiness and repayment history.

Answer

To determine the amount of interest the borrower will pay over the life of the loan.

Question 5

An underwriter is examining a borrower's employment history. The guidelines require a minimum of two years of stable employment. The borrower has been at their current job for 1.5 years and the previous job for 6 months, both in the same industry. How should the underwriter typically assess this situation?

Accepted Answer

The borrower meets the stable employment guideline by combining the two jobs, as they are in the same industry.

Answer

The borrower does not meet the stable employment guideline due to insufficient time at the current job.

Answer

The underwriter must request an exception, as the guideline is not strictly met.

Answer

The borrower only needs 1.5 years of employment if their income is high enough.

Question 6

Which of the following scenarios would most likely trigger a red flag for an underwriter regarding a borrower's capital and reserves?

Accepted Answer

The borrower's bank statements show several large, unexplained deposits in the months leading up to the loan application.

Answer

The borrower has a large down payment and 6 months of PITI in a checking account.

Answer

The borrower has diversified investments, including stocks, bonds, and a retirement account.

Answer

The borrower is receiving a gift for the down payment, and a gift letter is provided from an eligible donor.