Mortgage Process 3

Question 1

What is 'conditional approval' in the mortgage underwriting process?

Accepted Answer

The loan is approved provided the borrower satisfies specific outstanding conditions

Answer

A conditional approval means the underwriter is satisfied overall but requires additional documentation or clarification before issuing a clear-to-close.

Question 2

What is the purpose of the 'clear to close' (CTC) status in the mortgage process?

Accepted Answer

All underwriting conditions have been satisfied and the loan is ready to fund

Answer

Clear to close means all conditions have been met, the loan is approved, and the lender is ready to prepare closing documents and fund the loan.

Question 3

What is a 'gap in employment' and why does it concern mortgage underwriters?

Accepted Answer

A break in the borrower's employment history that may indicate income instability

Answer

Employment gaps raise questions about income continuity; underwriters may require a letter of explanation and current employment verification.

Question 4

What happens if the home appraisal comes in lower than the purchase price?

Accepted Answer

The borrower may need to renegotiate the price, pay the difference in cash, or walk away

Answer

Lenders base the loan on the lower of purchase price or appraised value, so a low appraisal creates a gap the buyer must resolve through negotiation or additional funds.

Question 5

What is 'seasoning' as it relates to funds used for a down payment?

Accepted Answer

The requirement that funds have been in the borrower's account for a minimum period, typically 60 days

Answer

Lenders require down payment funds to be 'seasoned' (held in the borrower's account for at least 60 days) to ensure they are not undisclosed loans.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Process 3