SAFE Financial Analysis & Loan Documentation 4

Question 1

When calculating the qualifying income for a rental property, lenders typically use what percentage of the gross rental income?

Accepted Answer

75%

Answer

Most conventional guidelines allow 75% of gross rental income to account for vacancy and maintenance expenses.

Question 2

A borrower's credit report shows a collections account with a $500 balance. Under most conventional guidelines, what must happen before closing?

Accepted Answer

The lender must include a monthly payment in the DTI calculation or require payoff, depending on guidelines

Answer

Collection account treatment varies by guideline; lenders may include a calculated monthly payment in DTI or require payoff depending on loan type and lender overlay.

Question 3

What is the maximum back-end DTI ratio typically allowed for a Qualified Mortgage (QM) under standard GSE guidelines?

Accepted Answer

50%

Answer

Fannie Mae and Freddie Mac allow back-end DTI up to 50% for borrowers who meet compensating factor requirements, though 43% was the original QM threshold.

Question 4

What does the Annual Percentage Rate (APR) represent on mortgage disclosures?

Accepted Answer

The true cost of credit expressed as a yearly rate, including fees and charges

Answer

APR reflects the total cost of borrowing over a year, including the interest rate plus certain fees, expressed as an annualized percentage.

Question 5

A borrower has been employed at the same company for 18 months after switching careers. How should the loan originator treat this employment history?

Accepted Answer

Analyze the prior employment and income to ensure a two-year employment history is documented

Answer

Lenders require a two-year employment history; a career change within that period requires documenting prior employment to satisfy the full timeline.

(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 4