Mortgage Mortgage Underwriting Principles Questions and Answers 2

Question 1

Which ratio compares a borrower's total monthly debt payments to their gross monthly income?

Accepted Answer

Debt-to-income ratio

Answer

The debt-to-income (DTI) ratio measures all recurring monthly debt obligations against gross monthly income.

Question 2

What is the primary purpose of an appraisal in the mortgage underwriting process?

Accepted Answer

To determine the fair market value of the property

Answer

An appraisal provides an independent estimate of the property's fair market value to ensure the loan amount is appropriate.

Question 3

Under Qualified Mortgage (QM) rules, what is the maximum DTI ratio generally allowed?

Accepted Answer

43%

Answer

The general QM rule caps the debt-to-income ratio at 43% to ensure borrower ability to repay.

Question 4

Which of the following would most likely trigger a referral to a senior underwriter?

Accepted Answer

Large unexplained deposits in the borrower's bank account

Answer

Large unexplained deposits raise concerns about the source of funds and may indicate undisclosed liabilities or fraud.

Question 5

What does the term 'compensating factors' refer to in mortgage underwriting?

Accepted Answer

Strengths that offset weaknesses in a borrower's application

Answer

Compensating factors are positive borrower attributes, such as large cash reserves, that can offset concerns like a slightly high DTI.

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