Chapter 4 General Mortgage Knowledge
True or False: There is no mortgage insurance in DVA Loans. Instead of mortgage insurance, there is a one-time non-refundable variable DVA funding fee that can be included in the loan.
true
True or False: These are the qualifying guidelines of a conventional loan: -28% total housing expense ratio -36% total debt-to-income ratio -Borrowers must qualify under both ratios -Borrowers should have 2 months of reserves on deposit
true
True or False: Two eligible veterans may combine their VA Benefits to qualify for a larger loan.
true
True or False: With an FHA Loan, at minimum, the property must be free of health and safety hazards.
true
True or False: With an FHA Loan, if the UFMIP for a 15-year or 30-year loan is paid in cash at closing, it may be paid by the borrower or by the seller, however, it must all be paid in cash or all of the premium must be financed.
true
True or False: With an FHA Loan, required repairs for existing properties include those that: -Protect the health and safety of the occupants -Protect the security of the property -Correct physical deficiencies or conditions affecting structural integrity
true
True or. False: With an FHA Loan, financed MIP cannot be canceled.
true
In addition to mortgage insurance premium (MIP), FHA requires an initial premium called the what?
upfront mortgage insurance premium (UFMIP)
In a DVA Loan, the lender can charge up to______% of the loan amount to cover cost. If the loan does not close for any reason, the lender must refund this flat fee.
1
A FHA-Eligible Property must be a ____ to ____ unit owner-occupied residence.
1 4
The FHA UFMIP is currently _______%
1.75
The typical funding fee in a DVA Loan is _______ percent of the purchase price of the home.
2.3
In a conventional loan, PMI is required on all loans where the borrower puts down less than ______% of the loan amount at closing.
20
Veterans entitlement is based on ______% of the purchase price (or appraised value) or of the County Limit ($548,250 in most counties) up to a maximum of $137,062.
25
the max guarantee for DVA loans is _____% of the purchase price or sales value.
25
What is the total housing expense ration in a conventional loan?
28%
What are the debt ratio in a USDA Guaranteed loan (Section 502 loan)?
29/41
The minimum down payments on a conventional loan is ____-____%, depending on the loan program.
3 5
What is the max Seller Concessions allowed (closing cost) in a conventional loan?
3%
The FHA requires the borrower to invest in the loan transaction by making a _______% down payment based on sales price or appraisal (whichever is less). The entire down payment can be a _______.
3.5 gift
The maximum allowable term on FHA/VA loans is ______ years.
30
The maximum term for a DVA loan is _____ years.
30
A traditional mortgage is defined as a what?
30 year Fixed
What are the FHA qualifying ratios?
31/43
In a USDA Guaranteed loan (Section 502 loan), "Rural" can include small towns up to how many people?
35,000
What is the total debt-to-income ratio in a conventional loan?
36%
DVA Loans are permitted to contain up to ______% seller concessions.
4
The late fee for a DVA loan is ____% of the monthly P&I.
4
The late fee in a USDA Guaranteed loan (Section 502 loan) is ___% of the monthly P&I.
4
With an FHA loan, the maximum late charge is _____% of the P&I only.
4
The Debt Ratio for a DVA Loan is the PITI plus all other debt. It must be no more than ______% of their gross monthly income and he/she must also meet the residual income requirements.
41
In a conventional loan, the late fee is _______% of the monthly P&I.
5
With an FHA loan, sales concessions (closing costs) are limited to ____% of the sales price.
6
With a DVA Loan, the borrower must occupy the property within ______ days after closing and plan to occupy the property for at least _____ year.
60 1
With an FHA Loan, the borrower must occupy the property within ______ days after closing and plan to occupy the property for at least _____ year.
60 1
For FHA loans made after January 1, 2001, MIP is automatically canceled when the LTV (loan to value ratio) reaches _____% of the original value (for 30-year mortgages, the annual MIP must have also been paid for at least five years).
78
If a home is selling for $350,000 - what is the max amount the DVA will guarantee?
87,500 ($350,000 x 25%)
With an FHA Loan, an underwriter will use the __________ to determine whether a borrower has ever failed to repay their federal debts or obligations. This system is a database created by the federal government and used for this specific purpose.
CAVRS (Credit Alert Verification Reporting System)
What are the two documents needed for VA Eligibility?
COE (certificate of eligibility - based on length of service) DD214 (discharge paperwork for those who have been discharged)
The reasonable value of the property is obtained through a DVA appraisal, which is also called what two things?
CRV (Certificate of Reasonable Value) NOV (Notice of Reasonable Value)
MLOs may see a borrower who does not meet the minimum standards established by Fannie Mae/Freddie Mac classified as a ______ or _____ borrower. This might be someone who has had a credit problem in the past.
B C
What loans are available to eligible veterans for the purchase of owner-occupied single-family homes and for multi-family dwellings up to four units if the veteran intends to occupy one of the units as the primary residence?
DVA
The ________'s main purpose in guaranteeing loans is to help meet the housing needs of eligible veterans who have served or are currently serving on active duty in the U.S. Armed Forces, which includes the Army, Navy, Air Force, Marine Corps, Coast Guard, Reserves, or National Guard.
DVA (Department of Veteran Affairs)
Which loans are guaranteed by the federal government through the Veterans Benefits Administration, which is part of the Department of Veterans Affairs (DVA)?
DVA guaranteed loans
Court-ordered judgments must be paid off before an _______ loan can close.
FHA
What is an agency of the Department of Housing and Urban Development (HUD) that insures private mortgage lenders against the possibility of borrowers defaulting on certain mortgage loans?
FHA (Federal Housing Administration)
What are the three types of government-related loans that are integral parts of the mortgage industry?
FHA (federal housing administration loans) DVA (department of veteran affairs loans) USDA (united states department of agriculture loans)
What defines a non-traditional mortgage as anything other than a 30-year fixed rate mortgage?
SAFE Act
A USDA Guaranteed loan is sometimes referred to as a what?
Section 502 loan
The ____________ Mortgage Scorecard was developed by HUD to evaluate the credit risk of FHA loans. It evaluates the overall creditworthiness of the applicants.
TOTAL (Technology Open to Approved Lenders)
The HUD created which system for FHA Loans to evaluate the following? - credit score - monthly housing expense - number. of monthly payments in reserve - loan to value ratio - loan term
TOTAL Mortgage Scorecard (Technology Open to Approved Lenders)
With an FHA Loan, the _________ is calculated by multiplying the loan amount by a factor and then collecting that amount at closing. It can be paid by the borrower or the seller (for the borrower).
UFMIP (upfront mortgage insurance premium)
What loan is a Government insured 100% purchase loan for properties in rural areas or farming properties?
USDA Guaranteed (Section 502 loan)
Which loan requires USDA Mortgage insurance which is paid via two fees: an upfront guarantee fee equal to 1 percent of the loan amount, and an annual fee equal to 0.35 percent of the loan amount?
USDA Guaranteed loan (Section 502 loan)
In addition to the debt-to-income ratio in a DVA Loan, an underwriter must ensure that an eligible borrower has sufficient residual income remaining for ___________ __________.
family support
What is a designation for loans made to borrower who do not represent the high credit risk of subprime borrowers, but who do not quite meet the underwriting requirements for conforming prime rate loans?
alt-a
Which of the FHA's 5 "Cs of Underwriting" refers to the borrower's 'ability" to repay the debt based on sufficient income?
capacity
Which of the FHA's 5 "Cs of Underwriting" refers to the borrower's ability to make the required down payment, pay for closing cost, required reserves, etc.?
cash
Which of the FHA's 5 "Cs of Underwriting" is the borrower's willingness to repay the debt (different than the borrower's "ability" to repay the loan?
character
Which of the FHA's 5 "Cs of Underwriting" is the property being mortgaged as security for the loan?
collateral
Conventional loans are _________________ loans that limit loan amounts of single-family residences to the current limit of $548,250(effective 2021).
conforming
Since _________________ loans meet Fannie Mae / Freddie Mac standards these loans can be sold on the secondary market.
conforming
Borrowers utilizing which loan programs do not need to be first-time homebuyers and meet certain income criteria?
conventional
What type of loan just means that the loan is not part of a specific government program?
conventional
Which loans are made by a bank or institutional lender.
conventional
Which loans are not insured or guaranteed by a government entity or agency?
conventional
Which loans are written to guidelines set by government-sponsored entities (GSEs) so they may be sold on secondary market?
conventional
Which of the FHA's 5 "Cs of Underwriting" is evaluated by looking at the borrower's credit report?
credit
What are FHA's 5 "Cs of Underwriting"?
credit capacity cash collateral character
What are the two different qualification calculations that DVA loans require the originator to perform?
debt to income ratio residual income
An _____________ is the maximum amount that the VA will "guarantee" on behalf of a Veteran.
entitlement
What is a type of mortgage loan in which the interest rate and payments (principal and interest) remain the same for the life of the loan?
fixed rate mortgage
It is important to note that the DVA doesn't make loans; rather, it provides a _____________ for a specific portion of the loan amount made by approved lenders.
guarantee
FHA loans __________ lenders in the event of borrower default, and DVA and USDA loans provide a ______________ to lenders in the event of borrower default.
insure guarantee
The Federal Housing Administration (FHA) does not make, buy or sell loans. It __________ loans.
insures
What type of mortgage is a period of reduced payments, for a specified time, then payment increases to fully amortize by end of term?
interest only payment (straight note)
So-called __________ loans exceed the maximum loan amount established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac conforming mortgage loan limits.
jumbo
FHA mortgage insurance protects the _________ against default by the borrower for the life of the loan
lender
With an FHA Loan, the __________ determines which repairs must be made to make property eligible for financing.
lender
The ____________ set the interest rates, not the FHA or HUD.
lenders
What are two advantages of FHA loans?
low down payments no prepayment penalties
With an FHA Loan, the _____________ ______ is calculated by multiplying the base loan amount by a factor, then dividing it by 12.
monthly MIP
What is required for all FHA loans, regardless of the down payment?
mortgage insurance premium (MIP)
Is there a prepayment penalty in a USDA Guaranteed loan (Section 502 loan)?
no
What mortgages do not meet the underwriting requirements established by Fannie Mae and Freddie Mac and CANNOT be sold on the secondary market?
non conforming
Loans that exceed the conforming loan limit are called what?
non-conforming (jumbo loans)
What are two main reasons why a loan would be classified as nonconforming?
size of the loan credit quality of borrowe
True or False It is possible for a veteran to use some entitlement on a previous purchase, and have partial entitlement available for another purchase if: -The property, securing the DVA loan, has been sold and that loan has been paid in full. -An eligible veteran (not disabled/not dishonored) has agreed to assume the outstanding balance on a DVA loan and substitute his entitlement for the same amount originally used on the loan.
true
True or False: A common misconception about FHA loans is that they are targeted to lower-income borrowers or first-time homebuyers only.
true
True or False: A non-married co-borrower is not allowed on a DVA loan unless he or she is an eligible veteran who will occupy the home.
true
True or False: Applicants of a USDA Guaranteed loan (Section 502 loan) must meet income requirements based on the area median income (AMI) - max 115% of the AMI.
true
True or False: Conforming loans must meet the eligibility requirements of either the Federal National Mortgage Corporation (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).
true
True or False: If an entitlement is insufficient for a DVA Loan, a cash down payment may be allowed for the balance.
true
True or False: If legally married, spouse's income may also be considered for qualification purposes for a DVA Loan.
true
True or False: If the borrower has ever defaulted on a student loan or is delinquent or in default on any other type of federal debt, the borrower would not qualify for an FHA loan.
true
True or False: In a conventional loan, a 97% LTV loan is offered under "Home Ready (FNMA)" and "Home Possible (FHLMC)".
true
True or False: The DVA Loan Program provides veterans with an opportunity to receive a mortgage with no down payment and no prepayment penalty.
true
True or False: The FHA does not have income limits to determine who is eligible for its loans. However, the FHA sets a maximum mortgage amount that it will insure.
true
True or False: The lender, not DVA, sets the interest rate, discount points, and closing costs.
true
True or False: The one-time non-refundable variable DVA funding fee for DVA loans may be. waived for veterans with disabilities or surviving spouses.
true