Mortgage Underwriting Principles 2

Question 1

A borrower has a back-end DTI of 48% and is applying for a conventional loan. What is the most likely outcome?

Accepted Answer

Denial unless compensating factors exist

Answer

Automatic approval because income is sufficient

Answer

Approval with a higher interest rate only

Answer

Approval if the front-end DTI is under 28%

Question 2

Which asset type is generally NOT acceptable as reserves for mortgage qualification purposes?

Accepted Answer

Borrowed funds from a personal loan

Answer

401(k) vested balance at 60%

Answer

Checking account funds

Answer

Proceeds from the sale of another property

Question 3

An underwriter is reviewing a self-employed borrower's income. Which document is the primary source for calculating qualifying income?

Accepted Answer

Two years of federal tax returns (1040s)

Answer

Bank statements for the past 12 months

Answer

A CPA letter confirming income

Answer

The most recent year's W-2

Question 4

What is the purpose of the 4506-C form in the underwriting process?

Accepted Answer

To request tax transcripts directly from the IRS

Answer

To authorize a credit report pull

Answer

To verify employment with the borrower's employer

Answer

To document the property's appraised value

Question 5

When calculating qualifying income for a salaried borrower with regular overtime, what documentation is typically required?

Accepted Answer

Two-year history and evidence the overtime is likely to continue

Answer

Only the most recent pay stub

Answer

Employer letter stating overtime is guaranteed

Answer

Three months of bank statements showing deposits

Question 6

A property appraises for $290,000 but the purchase price is $310,000. The lender uses which value to calculate LTV?

Accepted Answer

The appraised value of $290,000

Answer

The purchase price of $310,000

Answer

The average of both values ($300,000)

Answer

The value selected by the borrower

Question 7

Which credit event has the longest standard waiting period before a borrower can qualify for a conventional conforming loan?

Accepted Answer

Foreclosure

Answer

Chapter 13 bankruptcy

Answer

Short sale with deficiency

Answer

Chapter 7 bankruptcy