Loan Underwriting and Processing Flashcards
6 cards from real Mortgage Loan Originator practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Loan Underwriting and Processing flashcards as text
A 'clear to close' (CTC) means:
Answer: Underwriting has approved the loan and all conditions have been satisfied
CTC indicates the underwriter has reviewed and approved all conditions, and the loan is fully approved and ready to proceed to closing.
In mortgage processing, what is the purpose of a 4506-C form?
Answer: To authorize the IRS to provide tax transcripts to the lender
The IRS Form 4506-C authorizes the IRS to release tax return transcripts directly to the lender, helping verify borrower-provided income documentation.
Which type of appraisal approach is most commonly used for single-family residential properties?
Answer: Sales comparison approach
The sales comparison approach, which compares the subject property to recently sold comparable properties, is the primary method for valuing single-family residences.
What does 'subject to appraisal' mean in a purchase transaction?
Answer: The loan is contingent on the property appraising at or above the purchase price
A subject-to-appraisal contingency means the purchase contract can be voided if the property appraises below the purchase price.
In underwriting, 'compensating factors' are used to:
Answer: Justify approval despite one or more risk factors exceeding guidelines
Compensating factors such as substantial reserves, low LTV, or a long stable employment history can support loan approval when a borrower exceeds standard DTI or credit thresholds.
What is PMI and when can a borrower request its removal on a conventional loan?
Answer: Private mortgage insurance; removed when LTV reaches 80% based on original value
PMI (private mortgage insurance) protects the lender against default and can be removed by the borrower once the LTV reaches 80% of the original appraised value or purchase price.