SAFE Financial Analysis & Loan Documentation 2

Question 1

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?

Accepted Answer

30%

Answer

DTI is calculated by dividing total monthly debts ($1,800) by gross monthly income ($6,000), resulting in 30%.

Question 2

Which document is used to disclose the final loan terms and closing costs to a borrower at least three business days before closing?

Accepted Answer

Closing Disclosure

Answer

The Closing Disclosure must be provided at least three business days before consummation under TRID rules.

Question 3

When verifying a self-employed borrower's income, which two years of tax documents are typically required?

Accepted Answer

Personal and business tax returns for two years

Answer

Self-employed borrowers must provide two years of personal and business tax returns to establish a reliable income history.

Question 4

A borrower's asset account shows a large unexplained deposit two months before closing. What must the lender do?

Accepted Answer

Require a letter of explanation and documentation of the source

Answer

Large unexplained deposits must be sourced; the borrower must provide a letter of explanation and supporting documentation per underwriting guidelines.

Question 5

Which ratio is used to determine if a borrower can afford the housing payment relative to their gross income?

Accepted Answer

Front-end (housing) ratio

Answer

The front-end or housing ratio compares the total housing payment (PITI) to the borrower's gross monthly income.

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test

SAFE Financial Analysis & Loan Documentation 2