Mortgage Loan Originator Loan Underwriting and Processing 3

Question 1

A 'clear to close' (CTC) means:

Accepted Answer

Underwriting has approved the loan and all conditions have been satisfied

Answer

CTC indicates the underwriter has reviewed and approved all conditions, and the loan is fully approved and ready to proceed to closing.

Question 2

In mortgage processing, what is the purpose of a 4506-C form?

Accepted Answer

To authorize the IRS to provide tax transcripts to the lender

Answer

The IRS Form 4506-C authorizes the IRS to release tax return transcripts directly to the lender, helping verify borrower-provided income documentation.

Question 3

Which type of appraisal approach is most commonly used for single-family residential properties?

Accepted Answer

Sales comparison approach

Answer

The sales comparison approach, which compares the subject property to recently sold comparable properties, is the primary method for valuing single-family residences.

Question 4

What does 'subject to appraisal' mean in a purchase transaction?

Accepted Answer

The loan is contingent on the property appraising at or above the purchase price

Answer

A subject-to-appraisal contingency means the purchase contract can be voided if the property appraises below the purchase price.

Question 5

In underwriting, 'compensating factors' are used to:

Accepted Answer

Justify approval despite one or more risk factors exceeding guidelines

Answer

Compensating factors such as substantial reserves, low LTV, or a long stable employment history can support loan approval when a borrower exceeds standard DTI or credit thresholds.

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Loan Underwriting and Processing 3