Financial Analysis & Loan Documentation Flashcards
7 cards from real SAFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis & Loan Documentation flashcards as text
A borrower has a gross monthly income of $6,000 and total monthly debt obligations of $1,800. What is their debt-to-income (DTI) ratio?
Answer: 30%
DTI is calculated by dividing total monthly debts ($1,800) by gross monthly income ($6,000), resulting in 30%.
Which document is used to disclose the final loan terms and closing costs to a borrower at least three business days before closing?
Answer: Closing Disclosure
The Closing Disclosure must be provided at least three business days before consummation under TRID rules.
When verifying a self-employed borrower's income, which two years of tax documents are typically required?
Answer: Personal and business tax returns for two years
Self-employed borrowers must provide two years of personal and business tax returns to establish a reliable income history.
A borrower's asset account shows a large unexplained deposit two months before closing. What must the lender do?
Answer: Require a letter of explanation and documentation of the source
Large unexplained deposits must be sourced; the borrower must provide a letter of explanation and supporting documentation per underwriting guidelines.
Which ratio is used to determine if a borrower can afford the housing payment relative to their gross income?
Answer: Front-end (housing) ratio
The front-end or housing ratio compares the total housing payment (PITI) to the borrower's gross monthly income.
On the Loan Estimate, what does the 'In 5 Years' section disclose?
Answer: The total interest paid over 5 years and the principal balance remaining
The 'In 5 Years' section shows the total amount paid (principal + interest + fees) and the remaining principal balance after 60 payments.
A borrower received a $10,000 gift from a relative to be used for a down payment. What documentation is required?
Answer: A gift letter stating no repayment is required, plus proof of transfer
Gift funds require a signed gift letter stating no repayment is expected and documentation showing the transfer of funds.