Mortgage Mortgage Underwriting and Financial Calculations Questions and Answers 2

Question 1

A borrower has a gross monthly income of $8,500 and total monthly debt payments of $3,230. What is their debt-to-income (DTI) ratio?

Accepted Answer

38%

Answer

DTI is calculated by dividing total monthly debt ($3,230) by gross monthly income ($8,500), which equals 38%.

Question 2

Which of the following would most likely cause an underwriter to issue a conditional approval rather than a clear-to-close?

Accepted Answer

An unexplained large deposit in the borrower's bank statement

Answer

Unexplained large deposits require sourcing documentation, prompting a conditional approval until the funds are verified.

Question 3

When calculating housing expense ratio for a conventional loan, which cost is NOT typically included?

Accepted Answer

Auto loan payments

Answer

Auto loan payments are part of the back-end (total) DTI ratio, not the front-end housing expense ratio.

Question 4

A property appraises at $280,000 but the purchase price is $295,000. If the borrower is putting 10% down, what is the maximum loan amount the lender will approve?

Accepted Answer

$252,000

Answer

Lenders use the lower of appraised value or purchase price ($280,000), and with 10% down the max loan is $280,000 x 0.90 = $252,000.

Question 5

An underwriter discovers that a borrower's income is derived 60% from base salary and 40% from overtime. What is the standard requirement for qualifying the overtime income?

Accepted Answer

A two-year history of receiving overtime with likelihood of continuance

Answer

Most guidelines require a documented two-year history of overtime income and evidence it is likely to continue.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Mortgage Underwriting and Financial Calculations Questions and Answers 2