Practice Test Geeks(NMLS) National Mortgage Licensing System Practice Test
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Loan Application and Qualification Flashcards

7 cards from real NMLS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Loan Application and Qualification flashcards as text

  1. Under the Ability-to-Repay (ATR) rule, which of the following is NOT one of the eight factors a lender must consider?

    Answer: Borrower's investment portfolio performance

    The ATR rule requires consideration of eight specific factors including income, debts, and employment, but a borrower's investment portfolio performance is not one of them.

  2. A borrower applies for a $300,000 loan on a property appraised at $375,000. What is the loan-to-value (LTV) ratio?

    Answer: 80%

    $300,000 divided by $375,000 equals 0.80, or an 80% LTV ratio.

  3. Which type of income is typically averaged over 24 months for qualifying purposes on a mortgage application?

    Answer: Overtime and bonus income

    Variable income types such as overtime, bonuses, and commissions are averaged over 24 months to determine a stable qualifying figure.

  4. What is the purpose of the Uniform Residential Loan Application (URLA), also known as Fannie Mae Form 1003?

    Answer: To collect standardized borrower financial and property information

    The URLA (Form 1003) is the standardized application used to collect borrower income, asset, liability, and property information needed for underwriting.

  5. For FHA loans, what is the maximum allowable back-end DTI ratio under standard guidelines?

    Answer: 50%

    FHA guidelines allow a back-end DTI up to 50% with compensating factors, though 43% is the standard threshold without compensating factors.

  6. What does 'seasoning' refer to in the context of mortgage lending?

    Answer: The length of time an asset or credit event has been in place

    Seasoning refers to the amount of time that has passed since a specific event (e.g., bankruptcy discharge, down payment deposit) to ensure stability or eligibility.

  7. Which of the following is considered an 'open-end' credit obligation that must be included in a borrower's monthly debt for DTI calculation?

    Answer: Credit card with a revolving balance

    Revolving credit card balances are open-end obligations that must be included in DTI calculations using the minimum payment shown on the credit report.