Mortgage Underwriting and Qualification 4

Question 1

A borrower has two mortgage late payments in the past 12 months. How does this typically affect FHA loan eligibility?

Accepted Answer

It may result in a downgrade to manual underwriting or denial

Answer

No impact — FHA ignores recent lates

Answer

It automatically disqualifies the borrower permanently

Answer

It only affects the interest rate, not eligibility

Question 2

What is the standard waiting period after a Chapter 7 bankruptcy before a borrower can qualify for a conventional loan?

Accepted Answer

4 years

Answer

1 year

Answer

2 years

Answer

7 years

Question 3

Which of the following best describes 'reserves' in mortgage underwriting?

Accepted Answer

Assets remaining after closing that could cover future mortgage payments

Answer

The lender's capital set aside for loan losses

Answer

The escrow account balance

Answer

The appraisal contingency fund

Question 4

What is a 'non-arm's length transaction' and why do underwriters scrutinize it?

Accepted Answer

A sale between related parties or those with a personal connection that could affect the price

Answer

A sale between strangers with no prior relationship

Answer

A loan without a co-borrower

Answer

A transaction with no seller concessions

Question 5

For a VA loan, what replaces the traditional PMI requirement?

Accepted Answer

A VA Funding Fee paid upfront or financed

Answer

Monthly MIP like FHA

Answer

A separate VA insurance premium

Answer

There is no cost — VA loans have no insurance requirement

Question 6

What does a 'conditional approval' mean in the underwriting process?

Accepted Answer

The loan is approved pending receipt of specific additional documents or clarifications

Answer

The loan is fully approved and ready to close

Answer

The loan is denied but can be appealed

Answer

The borrower must find a new property

Question 7

A self-employed borrower shows $120,000 gross income on their business return but takes $40,000 in deductions. What income does the underwriter typically use?

Accepted Answer

$80,000 — net after business deductions

Answer

$120,000 — gross business revenue

Answer

$40,000 — only the deduction amount

Answer

$160,000 — gross plus add-backs