Mortgage Loan Origination activities
Using ratios of 28/36, a borrower with $635 in monthly consumer debt payments and $39,000 in annual income will qualify for a maximum housing payment of what amount? a.) $910 b.) $275 c.) $535 d.) $1,170
$535 To determine the maximum housing payment, take the annual income and divide by 12 months. The gross monthly income is $3,250. The maximum monthly housing payment is ($3,250 x 28% = $910) and the maximum combined housing and consumer debt payment is ($3,250 x 36% = $1,170.) Now subtract the $635 monthly consumer debt from the maximum combined debt and this amount is $535. Since the consumer debt combined with the maximum housing payment exceeds the allowable combined ratio, the $535 figure is accurate.
How many days prior to loan consummation must a registered mortgage loan originator send a loan estimate to a qualified borrower? A.) 7 business days B.) Requirements do not apply to registered MLO's C.) 10 business days D.) 3 business days
A.) An MLO must send an LE 7 business days prior to consummation. That's the "7" in the 3/7/3 Rule. Note, TRID applies to all MLO's - whether registered or licensed. While a Registered MLO may not have to do the same testing / education requirements, they must comply with all applicable disclosure laws and timelines still, such as Reg Z.
When evaluating monthly debt, which is NOT considered? a.) credit union loan with seven payments remaining b.) car lease with two months remaining c.) child support d.) revolving credit card
Generally, the lender will not consider installment loan debt with less than ten payments remaining, except for leases, which always count regardless of how few payments remain.
Which statement concerning homeowners association fees and the 1003 loan application is FALSE? a.) Association fees must be included on the 1003 when they are to be paid directly by the borrower monthly. b.) Association fees are never required to be included on the 1003. c.) Association fees must be included on the 1003 if they are to be escrowed. d.) Association fees must be included on the 1003 when they are to be paid directly by the borrower annually.
The association fees must always be disclosed on the application as a monthly obligation in order for the debt ratios to be calculated properly. b.)
What type of appraisal has a value based upon the property as it stands, with no completed repairs calculated into the value? a.) "as is" appraisal b.) "drive by" appraisal c.) "subject to" appraisal d.) current appraisal
a. An "as is" appraisal is an appraisal that has a value listed with no repairs included.
What type of income calculation is used for VA loans? a.) residual income b.) financial statement c.) housing income d.) balance sheet
a. When qualifying an eligible borrower for a VA loan, the total debt service ratio is considered in addition to residual income.
What is the basic entitlement available to veterans for a VA loan? a.) $36,000 b.) $55,000 c.) $144,000 d.) $78,000
a.) $36,000All eligible veterans receive $36,000 of basic entitlement, or maximum guarantee amount.
What is the biggest component of a credit score? a.) payment history b.) types of credit in use c.) length of credit history amounts owed
a.) 35% of a FICO score is based on payment history.
When filling out the loan application, a borrower that has ownership interest in the business that employs her should be marked as self employed when that interest reaches what percentage? a.) 25% b.) 20% c.) 50% d.) 1%
a.) A borrower is considered to be self employed once the ownership interest in the employer reaches 25%.
What is an advantage of a VA loan? a.) A down payment is not required. b.) Interest rates are lower than with conventional loans. c.) PMI is required only for loans exceeding 95% LTV. d.) An appraisal is not required.
a.) A down payment is not required. VA loans permit a buyer to purchase with no money down.
A Registered Mortgage Loan Originator working for a depository institution must send new disclosures as appropriate at or within ___ business days of a valid changed circumstance. a.) 3 b.) 5 c.) 7 d.) 10
a.) An MLO must send new disclosures at or within 3 business days of an application or a valid changed circumstance.
A Loan Estimate must be received at least how many days prior to closing a mortgage loan? a.) 4 b.) 1 c.) 7 d.) 3
a.) CD = received 3 days prior. LE = received 4 days prior.
A borrower with a gross income of $3,000 per month would qualify for a housing payment of what amount--including taxes and insurance--using a conventional conforming mortgage? a.)$840 b.) $1,080 c.) $870 d.) $1,230
a.) Conventional ratios are 28/36, with 28% of the gross monthly income allowed for the total housing payment.
To determine net worth, subtract ________ from ________ . a.) liabilities / total assets b.) assets / debts c.) reserves / liabilities d.) total assets / reserves
a.) Net worth is determined by subtracting liabilities from total assets.
What terms do VA loan programs offer? a.) 30 years b.) 40 years c.) 2 years d.) 1 year
a.) The VA loan programs include terms of 10, 15, 20, 25, or 30 years.
When the appraiser researches the recent sales for identical properties in the area, then compares the subject property with the recent sales to aid in deciding a property value for the subject property, he is using what approach? a.) sales comparison approach b.) cost approach c.) highest and best use approach d.) income approach
a.) The appraiser is using the sales comparison approach. Highest and best use may be considered, but it is not an appraisal approach.
When applying for a VA loan, an inactive veteran needs to supply the DD-214 as proof of a.) discharge. b.) appraised value. c.) financial stability. d.) eligibility.
a.) The borrower needs to provide to the underwriter the DD-214, which is the proof of military discharge. Current service members will provide a statement of service.
A borrower receives their Closing Disclosure on Wednesday, December 24th. When is the fastest the borrower can possibly close the mortgage loan? a.) Monday, December 29th. b.) Saturday, January 3rd. c.) The same day, December 24th. d.) Saturday, December 27th.
a.) The day on which an event occurs is always day 0. Wednesday 24th = 0 Thursday 25th = Christmas, not business day Friday 26th = 1 Saturday 27th = 2 Sunday 28th = not business day Monday 29th = Closing.
Susan has a FICO score of 620. What is the minimum down payment (cash investment) contribution for her to get an FHA loan on a $75,000 home? a.) $2,625 b.) $2,250 c.) $1,500 d.) $750
a.) The minimum down payment required on an FHA loan is 3.5% when the borrower's FICO score is 580 or above. $75,000 X .035 = $2,625.
The Truth-In-Lending Act applies to: a.) Loan payable in 5 or more installments which are secured by 1-4 unit single-family dwellings b.) Loan payable in 5 or more installments which are secured by 5+ unit single-family dwellings c.) Loan payable in 4 or less installments which are secured multifamily dwellings d.) Loan payable in 4 or less installments which are secured by 1-4 unit single-family dwellings
a.) This is part of the core definition of when TILA / Reg Z applies.
What is NOT one of the factors underwriters consider in the decision whether to grant the mortgage loan? a.) cause b.) capacity c.) credit d.) collateral
a.) cause Among the factors that underwriters generally consider when deciding whether or not to grant the loan are: Capacity, Collateral, Credit, \ and Cash. The underwriter does not consider cause.
What is NOT part of a mortgage loan application? a.) income raises that are expected b.) residence history c.) declarations d.) employment history
a.) income raises that are expected The underwriter cannot consider future income. They can only consider income currently received and the likelihood current income will continue. Documented raises can be used for compensating factors.
Which information is NOT a consideration when evaluating a loan file? a. collateral b.) birthplace c.) debt ratio d.) credit history
b. As long as the borrower is legally allowed to be in the U.S., birthplace and country of origin are irrelevant.
Which element would be considered part of the gross living area? a.) finished basement b.) bedroom's walk-in closet c.) garage d.) unheated sun porch
b. Only heated, finished living areas above grade are considered in the square footage for the gross living area.
When can the real estate taxes be disregarded for the purpose of determining debt ratios? a.) when the borrower pays an escrow waiver fee b.) Real estate taxes can never be disregarded when determining debt ratios. c.) when the borrower will be paying these taxes directly without escrows d.) when the LTV is below 80%
b. The real estate taxes must be included in the debt ratios whether they are escrowed or not.
What is the LTV on a refinance with a loan amount of $135,000 and an appraised value of $200,000? a.) 65.70% b.) 67.50% c.) 68% d.) 65%
b.) $135,000 / $200,000 = 67.5%.
What is the primary purpose of a VA Streamline loan? a.) allow eligible veterans to assume an existing VA loan b.) allow veterans to refinance a mortgage at more favorable terms c.) shorten the loan process for returning combat veterans d.) provide cash-out for eligible veterans
b.) A VA Interest Rate Reduction Refinance Loan (IRRRL or VA Streamline) is intended primarily to put the veteran in a better position by reducing the interest rate or changing an ARM to a fixed rate.
While underwriting a borrower's loan file, you calculate this formula: Housing plus long-term debt divided by income. What have you just determined? a.) housing expense ratio b.) total debt to income ratio c.) loan-to-value ratio d.) stable monthly income ratio
b.) A borrower's total debt to income ratio is the relationship of the borrower's total monthly debt obligations (including housing and long-term debts with more than ten payments left) to income, expressed as a percentage.
Which of the following is NOT a typical cause of loan delinquency? a.) addiction b.) property tax increase c.) job loss d.) divorce
b.) A property tax increase usually isn't large enough to result in a borrower's loan delinquency. The other options are recognized as potential causes of defaulting on a mortgage.
Which of the following is a valid change which would allow the disclosure of a new Closing Disclosure in good faith, thus re-establishing the good faith tolerances of the loan transaction? a.) APR increases by .2%. b.)The borrower chooses to lock the rate. c.) The MLO adds a standardized origination fee. d.) A prepayment penalty is added to the loan.
b.) Answer options A and B would trigger another waiting period, but are not valid changed circumstances. There is a difference between 1) whether a new waiting period is triggered (APR +.125%, prepayment penalty, program change) or 2) whether a change in loan terms was valid or not (qualification change, locking rate, borrower choice). Make certain you look at whether the question is asking about days / dates, or valid changes / faith.
Which information is NOT a consideration when evaluating a loan file? a.) credit history b.) birthplace c.) collateral d.) debt ratio
b.) As long as the borrower is legally allowed to be in the U.S., birthplace and country of origin are irrelevant.
What is the required down payment on a USDA Rural Development loan? a.) 10% b.) No down payment is required. c.) 3.50% d.) 5%
b.) Borrowers who meet the income limits in designated rural areas do not need a down payment to get a USDA Rural Development loan.
Your borrower has just graduated college and has always lived with his parents. He has a good job, but has no established reporting credit, but has paid his miscellaneous bills on time. Though he has no down payment, his parents are giving him $5,000 so he can buy a house. The best type of loan he should apply for is a(n) a.) VA loan. b.) FHA loan. c.) conforming loan. d.) subprime loan.
b.) He should apply for an FHA loan, as they will accept alternative credit and have programs for down payment assistance. Also, an FHA loan allows the use of gift funds for the entire down payment.
An MLO may disclose a Loan Estimate and Closing Disclosure on the same day, provided that the MLO waits a full 7 days from sending a Loan Estimate until closing the loan. a.) True b.) False
b.) May NOT disclose LE and CD on same day. Must be at least 1 business day apart.
When looking at the Closing Disclosure, which of these charges could show a change from the Loan Estimate by more than 10%? a.) origination fee b.) homeowner's insurance c.) government recording charges d.) transfer taxes
b.) Of these, only the difference in the homeowner's insurance from the Loan Estimate to the Closing Disclosure could show more than a 10% increase. Items such as this which would be escrowed monthly always can always change by any amount.
Which element would be considered part of the gross living area? a.) finished basement b.) bedroom's walk-in closet c.) unheated sun porch d.) garage
b.) Only heated, finished living areas above grade are considered in the square footage for the gross living area.
What dollar amount would be paid if the transaction charges 3 points, the loan amount being $700,000, and the sale price being $750,000? a.) $22,500 b.) $21,000 c.) $22,000 d.) $20,000
b.) Points are charges on the loan amount and a point equals 1%, so 3% of $700,000 is $21,000.
Which of the following changed circumstances would trigger a new 3-day waiting period from receipt of a valid re-disclosed Closing Disclosure until closing? a.) A borrower elects to change the term of the loan. b.) A borrower chooses to take cash out, which results in an APR increase of .2% on an open-ended transaction. c.) A borrower's appraisal reflects a higher collateral value than initially expected. d.) A borrower chooses to take additional cash out, which does not result an in APR increase.
b.) Regardless if the transaction is closed-ended or open-ended, if the APR increases by .125% or more, there is a new 3 business day waiting period from receipt of a new CD to closing.
For an owner-occupied refinance transaction which closes on a Monday, assuming there are no federal holidays during the week, when does the rescission period expire? a.) Tuesday on the 7th business day after consummation b.) Thursday c.) Friday d.) Monday
b.) Rescission period expires on Thursday. Money moves and the loan funds on Friday. Make sure you read if the question is asking when the rescission expires (day 3) or the money moves (day 4).
What is the name of the document issued by the federal government to verify that a veteran meets the necessary qualifications for a VA mortgage? a.) Discharge Certificate b.) Certificate of Eligibility c.) Benefits Certificate d.) Qualification Verification
b.) The Certificate of Eligibility is the document required to apply for a VA loan. It outlines the maximum loan amount available that the VA will insure.
When refinancing a loan, with a prepayment penalty of 1%, how much is the penalty on a $150,000 loan? a.) $900 b.) $1,500 c.) $1,200 d.) $300
b.) The prepayment penalty is the full 1% if paid at any point during the penalty term. In this case, $150,000 x 1% (0.01) = $1,500.
What type of income calculation is used for VA loans? a.) financial statement b.) residual income c.) balance sheet d.) housing income
b.) When qualifying an eligible borrower for a VA loan, the total debt service ratio is considered in addition to residual income.
When evaluating monthly debt, which is NOT considered? a.) revolving credit card b.) credit union loan with seven payments remaining c.) car lease with two months remaining d.) child support
b.) credit union loan with seven payments remaining Generally, the lender will not consider installment loan debt with less than ten payments remaining, except for leases, which always count regardless of how few payments remain.
To be eligible for an FHA loan, one must be a.) a low-income borrower. b.) purchasing a home in a designated target area. c) a U.S. citizen and permanent resident, or non-permanent resident with a work visa. d.) a first-time homebuyer.
c) a U.S. citizen and permanent resident, or non-permanent resident with a work visa. The FHA does not have income limits to determine who is eligible for FHA assistance. Anyone who is a U.S. citizen, permanent resident, or non-permanent resident with a work visa may apply.
When looking at the Closing Disclosure, which of these charges could show a change from the Loan Estimate by more than 10%? a.) origination fee b.) government recording charges c.) homeowner's insurance d.) transfer taxes
c. Of these, only the difference in the homeowner's insurance from the Loan Estimate to the Closing Disclosure could show more than a 10% increase. Items such as this which would be escrowed monthly always can always change by any amount.
When a lender requests title insurance on the subject property at the time of the closing, the title company issues what type of protection? a.) hazard insurance policy b.) fraud policy c.) mortgagee title policy d.) owner's policy
c. The lender is also known as the mortgagee, and would therefore receive a mortgagee policy from the title company to protect their interest on the title.
When refinancing a loan, with a prepayment penalty of 1%, how much is the penalty on a $150,000 loan? a.) $300 b.) $1,200 c.) $1,500 d.) $900
c. The prepayment penalty is the full 1% if paid at any point during the penalty term. In this case, $150,000 x 1% (0.01) = $1,500.
VA loans allow for a maximum LTV of what percent? a.) 95% b.) 90% c.) 100% d.) 97%
c.) 100% VA loans allow 100% financing (no down payment), and also allow the seller to pay the borrower's closing costs.
What is the maximum seller concession for a VA loan? a.) Sellers cannot pay any of the buyers' closing costs for a VA loan. b.) 2% and no discount points c.) 4% and reasonable (2) discount points d.) 3% and 2 discount points
c.) 4% and reasonable (2) discount points The Veterans Administration allows the seller to pay 4% of the closing costs plus reasonable discount points (2%).
What is the loan-to-value if the loan amount is $118,000, the appraised value is $131,000 and the sales price is $135,000? a.) 88% b.) 100% c.) 90% d.) 95%
c.) 90% To determine the loan-to-value ratio, you need to divide 118,000 by 131,000 (the lowest of the sales price or appraised value) to get an LTV of 90%.
Which information is NOT relevant in determining comparables for an appraisal? a.) similarity to the subject b.) location c.) sales from five years previous d.) sales in the same market area
c.) A sale that occurred five years ago could not be considered a comparable sale when conducting an appraisal. Typically, only the previous 12 months market history is considered.
Which information is NOT relevant in determining comparables for an appraisal? a.) similarity to the subject b.) sales in the same market area c.) sales from five years previous d.) location
c.) A sale that occurred five years ago could not be considered a comparable sale when conducting an appraisal. Typically, only the previous 12 months market history is considered.
Which of the following changed circumstances would not be considered a valid reason for re-disclosure of a new Loan Estimate? a.) The borrower receives an unplanned reduction in their hourly wage b.) The borrower chooses to lock an interest rate c.) The MLO regrets overlooking the lender's title insurance policy d.) The borrower chooses to take additional cash, beyond what was initially applied for
c.) Borrower choice is a valid changed circumstance. Lender choice (or MLO mistake) is not! An unplanned reduction in hourly wage is also valid, as well as locking a rate.
Which of the following institutions is not considered to be a creditor, and thus cannot fund a mortgageloan? a.) Royal United Mortgage b.) Non-Depository Lender c.) Broker d.) FDIC-registered Bank
c.) Brokers are not creditors, and thus cannot fund a loan.
Which of the following is regarded as a good way to document a medical condition? a.) printed drug store receipt b.) letter from a friend c.) dated medical bills d.) number of days at home without pay
c.) Dated medical bills from the time of the incident would be optimal. A detailed letter of explanation will also be required.
How many additional days must the borrower wait to close on a fixed rate loan if the Annual Percentage Rate (APR) increases more than .125% from the original Closing Disclosure? a.) 5 additional business days b.) 7 additional business days c.) 3 additional business days c.) 10 additional business days
c.) If the Annual Percentage Rate (APR) increases more than .125%, from the initial CD for a fixed rate loan, the lender must redisclose and wait another three (3) business days to close the loan.
What type of appraisal has a value based upon what the property value would be when the listed repairs are finished? a.) "as is" appraisal b.) "drive by" appraisal c.) "subject to" appraisal d.) current appraisal
c.) Most lenders will not accept a "subject to" appraisal. The repairs need to be finished before an acceptable appraisal is made.
What is the monthly mortgage insurance payment on an $180,000 loan using a multiplier of 0.65%? a.) $65.00 b.) $9.75 c.) $97.50 d.) $180.00
c.) Multiply the loan amount by 0.65% ($180,000 x 0.0065 = $1,170) and remember to divide by the 12 monthly payments ($1,170 / 12 = $97.50).
According to the Mailbox Rule, a document can be considered received on the ___ business day after mailing a.) 7th b.) 10th c.) 3rd d.) 1st
c.) Must memorize - a document is considered received on the 3rd business day after mailing. NOTE: the only way around this is verified electronic signatures (ESIGN Act) or hand delivery verified with a physical signature.
Which would the FHA NOT allow for a purchase price addition? a.) solar energy systems b.) energy-related weatherization items c.) hot tubs d.) financeable repairs
c.) Some FHA loan programs allow financing of energy efficient renovations or repairs. A hot tub would not be an allowable price addition.
When can the real estate taxes be disregarded for the purpose of determining debt ratios? a.) when the borrower will be paying these taxes directly without escrows b.) when the borrower pays an escrow waiver fee c.) Real estate taxes can never be disregarded when determining debt ratios. d.) when the LTV is below 80%
c.) The real estate taxes must be included in the debt ratios whether they are escrowed or not.
After closing a mortgage loan on Monday 3rd, ABC mortgage learns the borrower only received one of the two required copies of the Notice of Right to Rescind. ABC Mortgage calls the borrower who then signs the form on Tuesday 4th. When would the loan fund? a.) Monday 3rd b.) Saturday 8th c.) Friday 7th d.) Never - as a rescission would occur
c.) The rescission clock starts ticking after the last signature is complete. If all paperwork has not been signed or received by the borrower as appropriate, the clock doesn't start yet. Last signature starts the clock.
What may have a negative impact on the value during an appraisal? a.) date of closing b.) a second mortgage from a traditional lending institution c.) excessive seller concessions for borrower closing costs d.) the amount of down payment the borrower is contributing
c.) The seller concession, which in many cases can be a very large sum of money provided to the buyer, is considered to be figured into the sale price. Unusually large concessions may be deducted from the value of the property if they are not common for an area.
What is required only of a borrower applying for a VA loan in order to complete the loan application? a.) credit bureau report b.) purchase sale agreement c.) certificate of eligibility d.) RESPA guidelines
c.) certificate of eligibility A potential borrower who is applying for a VA loan will need a certificate of eligibility and one of the other applicable discharge forms (DD214 or NGB 22/23 or Letter from Commanding Officer if still in active service) to complete the loan application. ACE is an automated system used by lenders to obtain an online certificate of eligibility. The DD214 or other appropriate form is needed to obtain the COE.
What appraisal method would NOT be used to determine the fair market value of real estate? a.) sales comparison approach b.) cost approach c.) market value approach d.) income approach
c.) market value approach While the sales comparison approach is sometimes referred to colloquially as the market approach, there is no appraisal approach called the market value approach. The other methods can be used to determine fair market value, but each utilizes different data.
When a lender requests title insurance on the subject property at the time of the closing, the title company issues what type of protection? a.) hazard insurance policy b.) owner's policy c.) mortgagee title policy d.) fraud policy
c.) mortgagee title policy he lender is also known as the mortgagee, and would therefore receive a mortgagee policy from the title company to protect their interest on the title.
When qualifying a borrower, an installment debt does NOT need to be included in the debt ratio when the balance of the term of repayment is less than how many months? a.) 5 b.) 15 c.) 20 d.) 10
d. Consumer debts that have less than 10 months of payments remaining do not need to be included for the purpose of calculating debt ratios. However, an installment debt with fewer monthly payments remaining also should be considered as a recurring monthly debt obligation if it significantly affects the borrower's ability to meet his or her credit obligations
When the appraiser researches the recent sales for identical properties in the area, then compares the subject property with the recent sales to aid in deciding a property value for the subject property, he is using what approach? a.) cost approach b.) income approach c.) highest and best use approach d.) sales comparison approach
d. The appraiser is using the sales comparison approach. Highest and best use may be considered, but it is not an appraisal approach.
When calculating the debt ratio, the calculation that best represents the front ratio is monthly a.) debt divided by gross monthly income. b.) debt divided by net monthly income. c.) housing debt divided by net monthly income. d.) housing debt divided by gross monthly income.
d. The front ratio is calculated by dividing the total monthly housing (PITI + MI, and Homeowners dues) by gross monthly income (before taxes).
A borrower who has just completed a professional degree (PhD), but has no work history, would have to wait how long before adequate employment history is established? a.) 12 months b.) 6 months c.) 24 months d.) The borrower must begin employment before the lender delivers the loan to Fannie Mae
d.)
Gavin has a FICO score of 572. What is the minimum cash investment required in order for him to obtain an FHA loan? a.) 3.5% b.) 5% c.) 2.5% d.) 10%
d.) 10% The minimum investment for an FHA loan when the FICO score is between 500 and 579 is 10%.
To calculate the housing expense ratio for a conventional conforming loan, you take stable monthly income and multiply by a.) 29% (0.29). b.) 36% (0.36). c.) 41% (0.41). d.) 28% (0.28).
d.) 28% (0.28). The housing expense ratio for a conventional loan is calculated by taking the borrower's stable monthly income and multiplying by 28% (0.28).
To calculate the housing expense ratio for an FHA-insured loan, you take stable monthly income and multiply by a.) 28%. b.) 43%. c.) 36%. d.) 31%.
d.) 31% The housing expense ratio for an FHA loan is calculated by taking the borrower's stable monthly income and multiplying by 31% (0.31).
A borrower may request to review their Final Closing Disclosure or HUD-1 Settlement Statement, as appropriate at least ____ business days prior to closing. a.) 5 b.) 3 c.) 7 d.) 1
d.) A borrower may review their Final Closing Disclosure (or HUD-1 if a HELOC) on the business day prior to closing (24 hours beforehand). This is different than the requirement that a borrower receive a Closing Disclosure (not "Final") a full 3 business days before closing.
Which of the following entities cannot employ a mortgage loan originator to take applications? a.) Banker b.) Lender c.) Broker d.) Processing Agency
d.) All of the others are examples of sponsors. A processing agency cannot take applications for a mortgage loan.
What type of appraisal has a value based upon the property as it stands, with no completed repairs calculated into the value? a.) "drive by" appraisal b.) "subject to" appraisal c.) "as is" appraisal d.) current appraisal
d.) An "as is" appraisal is an appraisal that has a value listed with no repairs included.
A borrower is purchasing a new home and would like to close the loan as fast as possible. According to the applicable rules and guidelines under Reg Z, if the borrower closes his loan on Monday January 8th, when would the loan fund? a.) January 11 b.) January 12 c.) January 16 d.) January 8
d.) As this is a purchase, there is no rescission period and the loan would fund on the same day it closes.
When qualifying a borrower, an installment debt does NOT need to be included in the debt ratio when the balance of the term of repayment is less than how many months? a.) 20 b.) 5 c.) 15 d.) 10
d.) Consumer debts that have less than 10 months of payments remaining do not need to be included for the purpose of calculating debt ratios. However, an installment debt with fewer monthly payments remaining also should be considered as a recurring monthly debt obligation if it significantly affects the borrower's ability to meet his or her credit obligations
Which characteristic distinguishes an FHA-insured loan from a conventional loan? a.) FHA loans do not require any mortgage insurance. b.) FHA loans are not assumable. c.) FHA loans do not require a down payment. d.) FHA loans cannot have prepayment penalties.
d.) FHA loan cannot contain a prepayment penalty.
What entity created the Uniform Residential Loan Application, form 1003? a.) Freddie Mac b.) HUD c.) Individual brokers create their own. d.) Fannie Mae
d.) Fannie Mae created Form 1003, which is used nationally for all types of loan.
Which document is not necessary to conduct a loan closing? a.) mortgage b.) closing disclosure c.) promissory note d.) appraisal
d.) The appraisal is not required to be signed at closing, and not all loans require an appraisal.
A borrower is purchasing a home for $120,000 and closing costs total 4% of the loan amount. The seller has agreed to contribute half of the buyer's closing costs. How much cash would the borrower need at closing in order to obtain an LTV of 85%? a.) $20,800 b.) $20,400 c.) $18,360 d.) $20,040
d.) The borrower would need 15% of the $120,000 purchase price, or $18,000 plus the additional 2% (half of the 4% closing costs) of the loan amount(120,000 - 18,000 = 102,000), or $2,040 for closing costs that the seller is not providing. $18,000 + $2,040 = $20,040
A borrower has a sales contract for $421,000, good credit, debt ratios of 25/32, has a stable job history, and stable residence history. She has $45,000 for a down payment. The best type of loan she should apply for is a(n) a.) predatory loan. b.) nonconforming loan. c.) subprime loan. d.) conforming loan.
d.) This loan amount is under the maximum for a conforming loan. The borrower would qualify for a conforming loan since the loan amount would be $376,000 ($421,000 - $45,000 = $376,000).
You are pre-qualifying Kristina for a purchase loan. She has debt equaling $890 a month and gross monthly income totaling $4,900 a month. The lender you will place the loan with allows debt ratios of 28% for housing ratio and 36% total debt. What is the maximum house payment--including principal, interest, taxes, and insurance--for which she qualifies? a.) $482 b.) $1,372 c.) $1,764 d.) $874
d.) Two calculations need to be done: $4,900 x 28% = $1,372.00. Then $4,900.00 x 36% = $1,764.00 - $890 = $874.00. Take the lower of the two. If you didn't do both calculations and you allowed them to have a payment of $1,372.00, by the time you added the debt, and divided by the $4,900, your back ratio would be too high.
When must an initial escrow statement be given to a borrower when consummating a mortgage loan transaction? a.) Before closing b.) At closing c.) Within 1 calendar year of closing d.) Within 45 days of closing
d.) While usually given at closing, an initial escrow statement must be given within 45 days of closing. At closing is not necessary - even if it's standard practice. Within 45 days is the rule.
Chapter ____ bankruptcy is also known as a liquidation proceeding. a.) 5 b.) 11 c.) 13 d.) 7
d.) With Chapter 7 bankruptcy, the debtor turns over all non-exempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts.
When calculating the debt ratio, the calculation that best represents the front ratio is monthly a.) housing debt divided by net monthly income. b.) debt divided by gross monthly income. c.) debt divided by net monthly income. d.) housing debt divided by gross monthly income.
d.) housing debt divided by gross monthly income. The front ratio is calculated by dividing the total monthly housing (PITI + MI, and Homeowners dues) by gross monthly income (before taxes).
What is the minimum number of comps required by most secondary lenders to ensure an accurate estimate of value when performing the sales comparison approach? a.) two b.) four c.) five d.) three
d.) three A minimum of three comparables is required by most secondary market lenders to ensure an accurate appraisal from sufficient data.
The value of an improvement is equal to a.) what it actually cost to make the improvement in both materials and labor. b.) the amount the owner adds to the listing price of the home when the improvement is made. c.) only what the owner spent on the materials necessary to make the improvement. d.) what it actually contributes in bona fide value to that piece of real estate.
d.) what it actually contributes in bona fide value to that piece of real estate. A particular item or feature of a property is only worth what it actually contributes in value to that piece of real estate.
