Mortgage Mortgage Underwriting and Qualification Questions and Answers 3

Question 1

What is an Automated Underwriting System (AUS), and which two systems are most commonly used in the U.S.?

Accepted Answer

A computer system that evaluates loan risk — Desktop Underwriter (DU) and Loan Prospector (LP)

Answer

DU (Fannie Mae) and LP (Freddie Mac) are the two primary automated underwriting systems that assess borrower risk and issue approval recommendations.

Question 2

During mortgage underwriting, what is the significance of a borrower receiving a 'Refer with Caution' finding from an AUS?

Accepted Answer

The loan has significant risk factors and is unlikely to be approved without major compensating factors

Answer

A 'Refer with Caution' is the most negative AUS finding, indicating serious risk concerns that make approval very difficult.

Question 3

Which of the following liabilities must an underwriter include in the DTI calculation even if the borrower is not the primary payer?

Accepted Answer

A cosigned auto loan where the borrower is legally obligated

Answer

Cosigned debts are legal obligations of the borrower and must be included in DTI unless the primary borrower can document 12 months of sole payment.

Question 4

What does the term 'trailing spouse income' refer to in mortgage qualification?

Accepted Answer

Income from a spouse who is relocating and has not yet secured employment in the new area

Answer

Trailing spouse income refers to earnings from a spouse who is moving with the borrower and may not yet have a job at the new location, making it generally non-qualifying.

Question 5

In FHA underwriting, what is the minimum credit score required to qualify for the 3.5% down payment option?

Accepted Answer

580

Answer

FHA loans require a minimum credit score of 580 to qualify for the standard 3.5% minimum down payment.

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Mortgage Mortgage Underwriting and Qualification Questions and Answers 3