Mortgage Mortgage Underwriting and Financial Calculations Questions and Answers 3

Question 1

A borrower earns $6,200 per month and wants to qualify for a loan with a maximum front-end ratio of 28%. What is the maximum allowable monthly housing payment?

Accepted Answer

$1,736

Answer

Maximum housing payment is $6,200 x 0.28 = $1,736.

Question 2

During the underwriting process, a tri-merge credit report is pulled. What does this report combine?

Accepted Answer

Data from Equifax, Experian, and TransUnion

Answer

A tri-merge credit report consolidates credit data from the three major bureaus: Equifax, Experian, and TransUnion.

Question 3

An underwriter is reviewing a self-employed borrower's tax returns and notices a net operating loss carryforward. How should this be treated?

Accepted Answer

It should be added back to the borrower's qualifying income since it is a non-cash deduction

Answer

Net operating loss carryforwards are non-recurring paper losses and are typically added back when calculating qualifying income.

Question 4

What is the purpose of the Loan Estimate (LE) that must be provided within three business days of a mortgage application?

Accepted Answer

To disclose estimated loan terms, projected payments, and closing costs to the borrower

Answer

The Loan Estimate provides borrowers with standardized disclosures of estimated terms, payments, and costs within three business days of application.

Question 5

When using the income approach to value a rental property for underwriting, which figure does the appraiser capitalize?

Accepted Answer

Net operating income

Answer

The income approach capitalizes net operating income (NOI) by dividing it by a capitalization rate to estimate property value.

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Mortgage Mortgage Underwriting and Financial Calculations Questions and Answers 3