Mortgage Underwriting and Financial Calculations 4

Question 1

What does it mean when a loan is 'underwater' or has 'negative equity'?

Accepted Answer

The outstanding loan balance exceeds the property's current market value

Answer

Negative equity (being underwater) means the loan balance is higher than what the property is currently worth.

Question 2

When calculating the monthly payment on a $250,000 loan at 6% for 30 years, which component is NOT included in PITI?

Accepted Answer

Utility bills

Answer

PITI stands for Principal, Interest, Taxes, and Insurance — utility bills are not included.

Question 3

A borrower has $50,000 in student loans on income-driven repayment (IDR) showing a $0 monthly payment. Under Fannie Mae guidelines, how is this treated for DTI?

Accepted Answer

1% of the balance ($500) is used

Answer

Fannie Mae requires 1% of the outstanding student loan balance when the payment is $0 or deferred.

Question 4

What is an 'automated underwriting system' (AUS) finding of 'Approve/Eligible' vs. 'Refer'?

Accepted Answer

Approve/Eligible means the loan meets guidelines; Refer means a human underwriter must review it

Answer

Approve/Eligible indicates the AUS finds the loan compliant; Refer sends the file to a human underwriter for manual assessment.

Question 5

Which calculation correctly determines the amount of mortgage insurance premium (MIP) on an FHA loan?

Accepted Answer

Base loan amount × annual MIP rate / 12 months

Answer

FHA annual MIP is calculated as the base loan amount times the applicable annual MIP rate, then divided by 12 for the monthly premium.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Underwriting and Financial Calculations 4