CMP - Certified Mortgage Processor Analyzing Borrower Financials Questions and Answers

Question 1

A self-employed borrower provides two years of tax returns. Their Schedule C net profit was $75,000 in the most recent year and $65,000 in the prior year. What is the qualifying monthly income a mortgage processor should calculate for this borrower?

Accepted Answer

$5,833

Answer

To calculate the qualifying monthly income for a self-employed borrower, lenders typically average the net profit from the two most recent years of tax returns. The calculation is: ($75,000 + $65,000) / 24 months = $140,000 / 24 = $5,833.33.

Question 2

When analyzing a borrower's bank statements, which of the following would be the BIGGEST red flag for an underwriter?

Accepted Answer

Several non-sufficient funds (NSF) fees within the last 60 days

Answer

Multiple non-sufficient funds (NSF) fees, or overdrafts, indicate to a lender that the borrower may have difficulty managing their finances and could be a high-risk borrower. While large deposits or withdrawals require documentation, NSF fees directly question the borrower's ability to handle their existing financial obligations.

Question 3

A borrower is purchasing a duplex as an owner-occupied property. They will live in one unit and rent out the other. The appraiser determines the fair market rent for the second unit is $1,600 per month. How much of this rental income can typically be used for qualifying purposes?

Accepted Answer

$1,200

Answer

Lenders typically use 75% of the gross estimated rental income to account for potential vacancies and maintenance costs. Therefore, the qualifying income would be $1,600 * 0.75 = $1,200.

Question 4

A borrower has a gross monthly income of $7,000. Their monthly liabilities include a $500 car payment, a $250 student loan payment, and a $150 minimum credit card payment. The proposed new housing payment (PITI) is $2,100. What is the borrower's back-end debt-to-income (DTI) ratio?

Accepted Answer

43%

Answer

The back-end DTI ratio includes all recurring monthly debts plus the new housing payment, divided by the gross monthly income. The calculation is: ($500 car + $250 student loan + $150 credit card + $2,100 PITI) / $7,000 = $3,000 / $7,000 = 0.4285, or approximately 43%.

Question 5

Which of the following is generally considered an acceptable source for a borrower's down payment funds?

Accepted Answer

A documented and verified gift from an immediate family member

Answer

Lenders require that down payment funds be sourced and seasoned to prevent fraud and undisclosed debt. A documented gift from a family member, accompanied by a proper gift letter, is an acceptable source. Cash advances, unsecured loans, and unseasoned cash are not acceptable as their origins cannot be verified and may represent new, undisclosed liabilities.

CMP - Certified Mortgage Processor Practice Test

CMP - Certified Mortgage Processor Practice Test

CMP - Certified Mortgage Processor Analyzing Borrower Financials Questions and Answers