Mortgage Underwriting and Financial Calculations 5

Question 1

A borrower refinances from a 30-year loan with 20 years remaining to a new 30-year loan. What is the primary financial risk of this strategy?

Accepted Answer

The borrower restarts the amortization clock, paying more total interest over time

Answer

The new interest rate will always be higher

Answer

The LTV will automatically exceed 80%

Answer

The borrower will owe a prepayment penalty on the new loan

Question 2

What is 'compensating factors' in mortgage underwriting?

Accepted Answer

Positive attributes that offset a borrower's risk factors and may allow exception approvals

Answer

Negative items in a borrower's credit report

Answer

Additional fees charged when DTI exceeds limits

Answer

The lender's internal rate adjustment for risk

Question 3

On an adjustable-rate mortgage (ARM), the 'fully indexed rate' is calculated as:

Accepted Answer

The index rate plus the margin

Answer

The initial teaser rate plus margin

Answer

The cap rate minus the start rate

Answer

The margin minus the index

Question 4

What is 'seasoning' in the context of mortgage underwriting?

Accepted Answer

The length of time an asset or credit event has been established or on record

Answer

Adding flavoring to a loan's marketing materials

Answer

The process of adjusting a loan's interest rate over time

Answer

The lender's internal review period before funding

Question 5

A borrower has a monthly gross income of $7,000. Their front-end ratio is 25% and back-end ratio is 40%. What are the maximum PITI and total debt payments?

Accepted Answer

PITI $1,750 / Total debts $2,800

Answer

PITI $2,100 / Total debts $3,200

Answer

PITI $1,500 / Total debts $2,500

Answer

PITI $1,750 / Total debts $3,000

Question 6

Which statement best describes a 'rate and term refinance'?

Accepted Answer

Refinancing solely to change the interest rate, term, or both without taking cash out

Answer

Refinancing to receive cash above the payoff amount

Answer

Refinancing from a conventional to an FHA loan with cash back

Answer

Adding a co-borrower to an existing mortgage

Question 7

An underwriter calculates a borrower's effective income by averaging two years of W-2s: $58,000 and $64,000. What monthly income is used for qualifying?

Accepted Answer

$5,083

Answer

$4,833

Answer

$5,333

Answer

$5,500