Mortgage Mortgage Underwriting and Financial Calculations Questions and Answers 2 — Questions and Answers
Question 1: A borrower has a gross monthly income of $8,500 and total monthly debt payments of $3,230. What is their debt-to-income (DTI) ratio?
- 38% (Correct answer)
- 42%
- 35%
- 45%
Correct answer: 38%
DTI is calculated by dividing total monthly debt ($3,230) by gross monthly income ($8,500), which equals 38%.
Question 2: Which of the following would most likely cause an underwriter to issue a conditional approval rather than a clear-to-close?
- An unexplained large deposit in the borrower's bank statement (Correct answer)
- A credit score of 740
- A stable two-year employment history
- A loan-to-value ratio of 75%
Correct answer: An unexplained large deposit in the borrower's bank statement
Unexplained large deposits require sourcing documentation, prompting a conditional approval until the funds are verified.
Question 3: When calculating housing expense ratio for a conventional loan, which cost is NOT typically included?
- Auto loan payments (Correct answer)
- Property taxes
- Homeowner's insurance
- Private mortgage insurance
Correct answer: Auto loan payments
Auto loan payments are part of the back-end (total) DTI ratio, not the front-end housing expense ratio.
Question 4: A property appraises at $280,000 but the purchase price is $295,000. If the borrower is putting 10% down, what is the maximum loan amount the lender will approve?
- $252,000 (Correct answer)
- $265,500
- $280,000
- $295,000
Correct answer: $252,000
Lenders use the lower of appraised value or purchase price ($280,000), and with 10% down the max loan is $280,000 x 0.90 = $252,000.
Question 5: An underwriter discovers that a borrower's income is derived 60% from base salary and 40% from overtime. What is the standard requirement for qualifying the overtime income?
- A two-year history of receiving overtime with likelihood of continuance (Correct answer)
- Overtime income from the most recent pay stub only
- A written guarantee from the employer that overtime will continue
- Overtime income is never allowed for qualification purposes
Correct answer: A two-year history of receiving overtime with likelihood of continuance
Most guidelines require a documented two-year history of overtime income and evidence it is likely to continue.
Question 6: Which reserves requirement is most common for a borrower purchasing a single-unit primary residence with a conventional loan?
- Zero to two months of PITI payments (Correct answer)
- Six months of PITI payments
- Twelve months of PITI payments
- Twenty-four months of PITI payments
Correct answer: Zero to two months of PITI payments
For a single-unit primary residence conventional loan, reserves of zero to two months PITI are typically required.
Mortgage Mortgage Underwriting and Financial Calculations Questions and Answers 2
A borrower has a gross monthly income of $8,500 and total monthly debt payments of $3,230.
What is their debt-to-income (DTI) ratio?