Mortgage Loan Originator Prep 3 — Questions and Answers
Question 1: A Qualified Mortgage (QM) generally cannot have a DTI ratio exceeding what threshold?
- 43% (Correct answer)
- 50%
- 36%
- 45%
Correct answer: 43%
Under the general QM definition, the borrower's total DTI ratio cannot exceed 43% at the time of origination.
Question 2: What is the SAFE Act's primary requirement for Mortgage Loan Originators?
- Registration or state licensure with background checks and testing (Correct answer)
- Mandatory continuing education of 40 hours per year
- Minimum net worth of $100,000 for all MLOs
- Employment only at federally chartered institutions
Correct answer: Registration or state licensure with background checks and testing
The SAFE Act requires MLOs to be either state-licensed or federally registered, including passing a background check and a national exam.
Question 3: Which loan type is specifically designed to help veterans purchase homes with no down payment?
- VA loan (Correct answer)
- FHA loan
- USDA loan
- Conventional loan
Correct answer: VA loan
VA loans are guaranteed by the Department of Veterans Affairs and allow eligible veterans, service members, and surviving spouses to purchase homes with no down payment.
Question 4: What is the purpose of Private Mortgage Insurance (PMI)?
- Protects the lender if the borrower defaults when LTV exceeds 80% (Correct answer)
- Protects the borrower's equity if property values decline
- Covers the borrower's mortgage payments during unemployment
- Insures the lender against title defects on the property
Correct answer: Protects the lender if the borrower defaults when LTV exceeds 80%
PMI protects the lender—not the borrower—against loss if the borrower defaults, and is typically required when the LTV ratio exceeds 80%.
Question 5: Under ECOA, how many days does a lender have to notify an applicant of adverse action after receiving a completed application?
- 30 days (Correct answer)
- 3 days
- 7 days
- 60 days
Correct answer: 30 days
ECOA requires creditors to notify applicants of adverse action within 30 days of receiving a completed credit application.
Question 6: Which document replaced the HUD-1 Settlement Statement for most closed-end mortgages after October 2015?
- Closing Disclosure (Correct answer)
- Loan Estimate
- TILA Disclosure
- Good Faith Estimate
Correct answer: Closing Disclosure
The Closing Disclosure replaced the HUD-1 Settlement Statement for most closed-end mortgages as part of the TRID (TILA-RESPA Integrated Disclosure) rule effective October 3, 2015.
Question 7: What is the maximum loan limit for a single-unit FHA-insured property in a standard-cost area for 2024?
- $498,257 (Correct answer)
- $350,000
- $726,200
- $600,000
Correct answer: $498,257
The 2024 FHA loan limit for a single-unit property in a standard-cost (floor) area is $498,257.
Mortgage Loan Originator Prep 3
A Qualified Mortgage (QM) generally cannot have a DTI ratio exceeding what threshold?