Mortgage Underwriting and Financial Calculations 3

Question 1

Which type of income is typically NOT usable for qualifying purposes without a two-year history?

Accepted Answer

Overtime income received for less than 12 months

Answer

Overtime income generally requires a 12–24 month history to be considered stable and predictable for qualifying.

Question 2

What is the purpose of the residual income analysis in VA loan underwriting?

Accepted Answer

To ensure the borrower has sufficient income after major expenses to meet living costs

Answer

VA residual income analysis measures net income remaining after housing and major expenses to ensure the veteran can maintain daily living.

Question 3

A lender is using the FICO score for mortgage underwriting. Which bureau score is typically used when three bureaus are pulled?

Accepted Answer

The middle of the three scores

Answer

Agency guidelines require use of the middle score when all three bureau scores are available.

Question 4

Which asset type is considered a 'liquid asset' acceptable for reserves and closing costs?

Accepted Answer

Checking and savings account balances

Answer

Checking and savings accounts are immediately accessible and qualify as liquid assets without restriction.

Question 5

An interest-only loan allows the borrower to pay only interest for a set period. How does this affect underwriting qualification?

Accepted Answer

The borrower qualifies based on the fully amortized principal and interest payment

Answer

Fannie Mae and Freddie Mac require qualification based on the fully amortized P&I payment, not the lower IO payment.

Mortgage Practice Test