SAFE General Mortgage Knowledge 3

Question 1

A borrower's gross monthly income is $6,000 and total monthly debt payments are $2,100. What is the DTI ratio?

Accepted Answer

35%

Answer

DTI = total monthly debts / gross monthly income = $2,100 / $6,000 = 35%.

Question 2

Which government agency insures FHA loans?

Accepted Answer

The Department of Housing and Urban Development (HUD)

Answer

FHA loans are insured by HUD's Federal Housing Administration, which protects lenders against borrower default.

Question 3

What is the minimum down payment requirement for an FHA loan for a borrower with a credit score of 580 or higher?

Accepted Answer

3.5%

Answer

Borrowers with credit scores of 580 or above qualify for the minimum FHA down payment of 3.5% of the purchase price.

Question 4

What is 'private mortgage insurance' (PMI) designed to protect?

Accepted Answer

The lender against borrower default on conventional loans

Answer

PMI protects the lender (not the borrower) in the event of default when the borrower has less than 20% equity.

Question 5

Which of the following loan types does NOT require a down payment from qualifying borrowers?

Accepted Answer

VA loan

Answer

VA loans, available to eligible veterans and service members, allow 100% financing with no down payment required.

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