FREE NMLS Loan Application and Qualification Questions and Answers

Question 1

A borrower earns a significant portion of their income from commissions.
To consider this income as stable and qualifying, what is the standard minimum history of receipt that conventional underwriting guidelines, such as Fannie Mae's, generally require?

Accepted Answer

A 24-month history, which can then be averaged.

Answer

A 6-month history with an upward trend.

Answer

A 12-month history if there are strong compensating factors.

Answer

A 36-month history to account for market fluctuations.

Question 2

A loan applicant has a gross monthly income of $7,500. Their proposed monthly housing payment (principal, interest, taxes, and insurance) is $2,100. They also have a $450 monthly car payment and a $200 student loan payment. What is their housing expense ratio, also known as the front-end DTI?

Accepted Answer

28.0%

Answer

36.7%

Answer

34.0%

Answer

43.3%

Question 3

An underwriter reviewing a credit report sees that a non-medical collection account with a balance of $1,500 is marked as "In Dispute" by the consumer. Which of the following actions will most likely be required to proceed with the loan?

Accepted Answer

The dispute must be removed so the credit score can be accurately recalculated without the dispute notation.

Answer

The loan must be automatically denied until the dispute is more than two years old.

Answer

The borrower must provide a letter of explanation for the MLO to place in the file.

Answer

The dispute can be ignored because the balance is under a certain threshold.

Question 4

In the "Declarations" section of the Uniform Residential Loan Application (URLA), a borrower answers "Yes" to the question, "Are you a party to a lawsuit in which you potentially have any personal financial liability?" What is the most appropriate next step for the mortgage loan originator?

Accepted Answer

Obtain detailed documentation about the lawsuit to determine its potential impact on the borrower's financial standing.

Answer

Advise the borrower that they cannot qualify for a loan while involved in a lawsuit.

Answer

Tell the borrower to change the answer to "No" if they believe they will win the lawsuit.

Answer

Ignore the declaration as it is not a public record and cannot be verified by the lender.

Question 5

A borrower plans to use funds received from a parent as part of their down payment. Which of the following is a critical piece of documentation the lender will require to verify these funds?

Accepted Answer

A signed gift letter stating there is no expectation of repayment.

Answer

A copy of the parent's most recent federal tax return.

Answer

A copy of a legally binding promissory note for the gifted amount.

Answer

A bank statement from the borrower showing the funds have been seasoned for 30 days.

Question 6

During a loan application for an unmarried individual applying for a mortgage on their own, which of the following inquiries by a mortgage loan originator is generally prohibited under the Equal Credit Opportunity Act (ECOA)?

Accepted Answer

Asking about the borrower's plans for having children.

Answer

Asking if the borrower is relying on alimony or child support income to qualify.

Answer

Asking about the borrower's marital status.

Answer

Asking for the name and address of the borrower's nearest living relative.

A borrower earns a significant portion of their income from commissions.To consider this income as stable and qualifying, what is the standard minimum history of receipt that conventional underwriting guidelines, such as Fannie Mae's, generally require?

A borrower earns a significant portion of their income from commissions.
To consider this income as stable and qualifying, what is the standard minimum history of receipt that conventional underwriting guidelines, such as Fannie Mae's, generally require?