NMLS Practice Test "LOAN ORIGINATION & UNDERWRITING" Part 7-2

Mortgage interest is paid in

arrears

A borrower may charge $500 for an appraisal and up to 1% of the loan amount to

his/her credit card to pay for lock-in fees

A rate lock is a

lender promise to hold a certain interest rate and a certain number of points for the borrower, usually for a specified period of time, while the loan application is processed

Each discount point and each loan origination point costs

1% of the loan amount

A borrower's payment history on previous mortgages or rent must be verified for

12 months

The borrower generally must use ____ of his or her own funds to make the required minimum cash down payment, although that down payment may be supplement with a

5%.....gift from a relative, domestic partner, fiancé, or fiancée

Flood insurance must be purchased from the

National Flood Insurance Program (NFIP)

The first mortgage payment due date

always skips one calendar month

Late fees are due

after the 15th of the month

Prorated mortgage interest paid by the

borrower at closing (loan amount x interest rate)/365 days) x number of days left in month including closing day

A par interest rate is the

break even rate for the lender, if a borrower wants a rate lower than par, the lender may offer discount points

Loan consummation is the point and time that the consumer becomes

contractually obligated on a credit transaction. Often referred to as "doc signing" or "closing" on the exam

Origination fee charged on loans that close

covers administrative costs to close/service loan and usually based on percent of the loan amount (1%= 1 point= 100 basis points or bps)

Origination fee charged on loans that close Covers administrative costs to close/service loan. Usually based on percent of the loan amount (1%= 1 point= 100 basis points or bps)

covers administrative costs to close/service loan. Usually based on percent of the loan amount (1%= 1 point= 100 basis points or bps)

Hazard insurance does NOT cover

damages due to perils of flood

The lender always makes the final decision to

fund a loan, the lender issues the Clear-to-close

Assessing an individual's risk (underwriting) may be

done manually or by automatic underwriting systems (AUS)

The underwriter is responsible for

evaluating both the risk of the borrower and the property

Each lock-in agreement must be in writing and contain:

expiration date of the lock the interest rate, any discount points, any commitment fee and lock-in fee if these exist

Applications can be taken

face-to-face, over the phone, through the mail or over the Internet

An applicant's interest rates can

float or be locked-in

If a property is in a flood zone, the lender will require

flood insurance (in addition to hazard insurance) for the life of the loan

Buy down points (temporary points)

for example, shown as FHA 2-1, ___ a purchaser to reduce the interest rate on a mortgage by 2% for the first year, 1% for the next year, and 0% every year thereafter

Annual interest rate is calculated as follows:

loan amount x interest rate

Monthly interest rate is calculated as follows:

loan amount x interest rate/12

Daily interest rate is calculated as follows:

loan amount x interest rate/365

Fixed discount points gives a borrower a

lower interest rate for the life of the loan.

When a married application qualifies for a mortgage based on his or her own financial capacity (without any assets or income of his or her spouse being taken into consideration), the spouse does

not need to sign the note

Discount points are

paid upfront to the lender for lowering the interest rate, and origination points are paid to the loan originator as a fee for service

The loan originator collects all the information and

sends the package to an underwriter

A gift must be accompanied by a gift letter that specifies

the dollar amount of the gift, and the date the funds were transferred. The letter must also contain the donor's statement that no repayment is expected and include the donor's name, address, phone number and relationship to the borrower

Homeowner's insurance policy is insurance that covers

the loss or damage to the home or property in the event of fire or other disaster such as tornado, snow, and hail damage

Discount points can be either temporary or fixed, and the cost of the point is a closing cost,

which is usually paid by the borrower, who also pays the origination point

The borrower may rescind any lock-in agreement until a

written confirmation of the agreement has been signed by the lender and mailed to the borrower

A point is 1% of the loan amount, so $135,000

x .01 = $1,350 per point