Loans Loan Processor 2

Question 1

A borrower's pay stubs show overtime income for 8 months. How should a loan processor treat this income for qualifying purposes?

Accepted Answer

Average it over 24 months if the employer confirms it will continue

Answer

Overtime income can be used if averaged over 24 months when it is likely to continue, or over the actual receipt period if less than 24 months with employer confirmation.

Question 2

Which document is used to verify a borrower's Social Security Number and identity during the loan processing stage?

Accepted Answer

Social Security card or government-issued photo ID

Answer

A Social Security card or government-issued photo ID (such as a driver's license or passport) is used to verify identity and SSN.

Question 3

What is a 'merged credit report' in the context of mortgage loan processing?

Accepted Answer

A report combining data from all three major credit bureaus into one document

Answer

A merged (tri-merge) credit report pulls data from Experian, Equifax, and TransUnion into a single report used by mortgage lenders.

Question 4

A borrower lists rental income on their application. What document does a processor typically require to verify active rental income?

Accepted Answer

Executed lease agreement and two years of tax returns showing Schedule E

Answer

An executed lease agreement plus Schedule E on federal tax returns is the standard documentation to verify and calculate qualifying rental income.

Question 5

What does LTV stand for and why is it critical to a loan processor?

Accepted Answer

Loan-to-Value ratio; it determines risk level and whether PMI is required

Answer

LTV (Loan-to-Value) is the loan amount divided by the property's appraised value, affecting interest rates, PMI requirements, and loan program eligibility.

Loans Practice Test

Loans Practice Test

Loans Loan Processor 2