Mortgage Underwriting and Qualification 5

Question 1

What is a 'letter of explanation' (LOE) commonly used for in mortgage underwriting?

Accepted Answer

To clarify derogatory credit events, large deposits, or gaps in employment to the underwriter

Answer

To explain the purpose of a home purchase to the seller

Answer

To justify the appraised value of a property

Answer

To request a rate lock extension

Question 2

Which loan program allows a debt-to-income ratio above 50% with strong compensating factors via AUS approval?

Accepted Answer

FHA loan approved through TOTAL Scorecard

Answer

USDA Rural Development loan

Answer

Conventional loan with PMI

Answer

Jumbo portfolio loan

Question 3

What is the LTV ratio on a $280,000 loan for a property appraised at $350,000?

Accepted Answer

80%

Answer

70%

Answer

75%

Answer

85%

Question 4

A borrower is purchasing a rental property. How do conventional guidelines typically treat future rental income from that property?

Accepted Answer

Generally not counted for qualification unless there is a signed lease and rental history

Answer

100% of projected rent is counted as income immediately

Answer

It is always excluded from income calculations

Answer

Rental income is counted at 125% to account for vacancies

Question 5

What is the difference between a 'hard' credit pull and a 'soft' credit inquiry in the mortgage process?

Accepted Answer

Hard pulls affect credit scores and are done with borrower consent; soft pulls do not affect scores

Answer

Soft pulls are more detailed and used for final underwriting; hard pulls are preliminary

Answer

Hard pulls are free; soft pulls cost a fee

Answer

There is no difference — both affect the credit score equally

Question 6

A borrower is 60 days delinquent on a student loan. Under FHA guidelines, how must this be handled?

Accepted Answer

The delinquent account must be brought current or placed in a repayment plan before closing

Answer

It can be ignored if the total amount is under $5,000

Answer

The loan is automatically denied with any student loan delinquency

Answer

The borrower must pay off the entire student loan balance

Question 7

What is 'trended credit data' and how does it affect conventional loan underwriting?

Accepted Answer

A 24-month history of credit card balance and payment patterns used by Fannie Mae's DU

Answer

A credit score trend over the past 10 years used only for jumbo loans

Answer

The average credit score across all three bureaus

Answer

A report showing only new credit accounts opened in the last 6 months