Practice Test Geeks(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test
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Processing and Underwriting 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 Processing and Underwriting flashcards as text

  1. What does PITI stand for in the context of mortgage payments?

    Answer: Principal, Interest, Taxes, and Insurance

    PITI represents the four components of a typical mortgage payment: Principal, Interest, Taxes (property), and Insurance (hazard/PMI).

  2. Which type of income is typically NOT acceptable for qualifying purposes without a two-year history?

    Answer: Overtime and bonus income

    Variable income sources like overtime and bonuses typically require a two-year history to demonstrate consistency before being used for qualification.

  3. A borrower has a gap in employment of five months. Under most underwriting guidelines, what is typically required?

    Answer: A written explanation letter and documentation that borrower is currently employed

    Most guidelines require the borrower to provide a written explanation for employment gaps over 30 days and documentation of current re-employment.

  4. What is a 'junior lien' in relation to a first mortgage?

    Answer: A lien in a subordinate position behind the first mortgage

    A junior lien (such as a HELOC or second mortgage) is subordinate to the first mortgage, meaning it gets paid after the senior lien in foreclosure.

  5. When underwriting a self-employed borrower using Schedule C, what figure is typically used as qualifying income?

    Answer: Net profit after business expenses

    For Schedule C borrowers, underwriters use the net profit from the business after deducting allowable expenses, averaged over two years.

  6. What is a 'non-arm's length transaction' and why does it matter in underwriting?

    Answer: A transaction between related parties that may not reflect true market value

    Non-arm's length transactions involve related parties (family, employer, etc.) and may involve inflated prices or undisclosed concessions, requiring additional scrutiny from underwriters.

  7. Under FHA guidelines, what is the maximum allowable seller concession as a percentage of the sales price?

    Answer: 6%

    FHA allows seller concessions up to 6% of the sales price; anything above 6% must be used to reduce the sales price dollar-for-dollar.