Mortgage Underwriting Principles 4

Question 1

What is the maximum seller concession allowed on a conventional loan with an LTV of 75%?

Accepted Answer

9%

Answer

Fannie Mae allows up to 9% in seller concessions when LTV is 75% or less for a primary or second home purchase.

Question 2

An FHA loan requires a minimum credit score of 580 for maximum financing. What down payment does this correspond to?

Accepted Answer

3.5%

Answer

FHA borrowers with a 580+ credit score qualify for the minimum 3.5% down payment; below 580 requires 10% down.

Question 3

When underwriting an investment property, how is rental income from the subject property typically treated for qualification?

Accepted Answer

75% of market rent is used, offsetting the PITI payment

Answer

Most guidelines allow 75% of projected or actual rent (a vacancy/maintenance factor) to offset the investment property's housing expense.

Question 4

Which underwriting red flag would most likely trigger a fraud investigation?

Accepted Answer

Inflated purchase price with large seller concessions concealing a kickback

Answer

Purchase price inflation combined with excessive seller concessions to conceal undisclosed cash-back arrangements is a classic mortgage fraud pattern.

Question 5

A borrower's credit report shows a collection account for $800. Under most conventional guidelines, what is required?

Accepted Answer

Medical collections are generally excluded from DTI calculation

Answer

Fannie Mae and Freddie Mac guidelines generally exclude medical collection accounts from the DTI calculation and do not require payoff.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Underwriting Principles 4