NMLS Loan Application and Qualification 2

Question 1

Under RESPA, a Loan Estimate must be delivered to the borrower within how many business days of receiving a loan application?

Accepted Answer

3 business days

Answer

RESPA requires the Loan Estimate to be provided within 3 business days of receiving a completed loan application.

Question 2

A borrower's gross monthly income is $7,000 and total monthly debt payments are $2,800. What is the debt-to-income (DTI) ratio?

Accepted Answer

40%

Answer

$2,800 divided by $7,000 equals 0.40, or a 40% DTI ratio.

Question 3

Which credit score model is most commonly used by mortgage lenders to evaluate borrower creditworthiness?

Accepted Answer

FICO Score

Answer

FICO Scores are the industry standard used by the vast majority of mortgage lenders for underwriting decisions.

Question 4

What does the term 'layered risk' mean in mortgage underwriting?

Accepted Answer

Several risk factors present simultaneously that compound overall loan risk

Answer

Layered risk refers to the combination of multiple risk factors (e.g., low credit score, high LTV, and high DTI) that together increase the probability of default.

Question 5

For a conventional loan, what is the maximum loan-to-value (LTV) ratio that typically avoids requiring private mortgage insurance (PMI)?

Accepted Answer

80%

Answer

Borrowers with an LTV of 80% or below (20% down payment) generally avoid the PMI requirement on conventional loans.

(NMLS) National Mortgage Licensing System Practice Test

(NMLS) National Mortgage Licensing System Practice Test

NMLS Loan Application and Qualification 2