Mortgage Underwriting and Qualification 2

Question 1

A borrower has a front-end DTI of 31% and a back-end DTI of 45%. Which conventional loan guideline does this violate?

Accepted Answer

Back-end limit of 43%

Answer

Front-end limit of 28%

Answer

Front-end limit of 33%

Answer

Back-end limit of 50%

Question 2

Which income type requires a two-year self-employment history to be considered stable by most underwriters?

Accepted Answer

Self-employment income

Answer

W-2 salary income

Answer

Pension income

Answer

Social Security income

Question 3

What is 'compensating factors' in mortgage underwriting?

Accepted Answer

Positive attributes that offset a borrower's weak credit profile

Answer

Fees charged to offset underwriting costs

Answer

A formula for calculating loan-to-value ratio

Answer

Discount points paid to reduce interest rate

Question 4

A property appraisal comes in $15,000 below the purchase price. What typically happens to the loan amount?

Accepted Answer

The loan is based on the appraised value, not the purchase price

Answer

The lender automatically raises the loan to match the purchase price

Answer

The borrower can ignore the appraisal gap

Answer

The seller must reduce the price by law

Question 5

Which document is used to verify a borrower's employment and income directly with their employer?

Accepted Answer

Verification of Employment (VOE)

Answer

Form 1003

Answer

Form 4506-C

Answer

Closing Disclosure

Question 6

What does 'layered risk' mean in the context of mortgage underwriting?

Accepted Answer

Several risk factors present simultaneously on a single loan file

Answer

Multiple insurance policies on one property

Answer

Stacking discount points on a loan

Answer

Having co-borrowers on the application

Question 7

A borrower wants to use gift funds for a down payment on a conventional loan. What is typically required?

Accepted Answer

A signed gift letter and documentation showing the funds were transferred

Answer

Nothing extra — gift funds are always acceptable without documentation

Answer

A notarized deed of gift from the donor

Answer

The donor must be a blood relative only