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
