Facts

Question 1

Difference between primary and secondary mortgage market

Answer 1

Primary = any retail transaction
Secondary = wholesale 

Primary sells the mortgage to secondary which is Fannie/Freddie/Ginnie

Question 2

Which primary lender will give you a construction loan ?

Answer 2

A commercial bank

Question 3

What is portfolio lending

Answer 3

A loan that is not sold and is kept as part of bank portfolio instead of selling in the secondary market.

Question 4

Underwriting processes for Fannie and Freddie

Answer 4

Fannie Mae - DU (Desktop underwriter)

Freddie Mac - LP (Loan Product Advisor)

Question 5

Yield spread premium (YSP)

Answer 5

Lender paid compensation. Must be disclosed and spread across the life of the loan embedded in the interest rate.

Question 6

Housing expense ratio

Answer 6

Total housing expense / Adjusted gross monthly income.

Question 7

Total debt to income ratio

Answer 7

Total Debt / adjustment gross monthly income.

Question 8

DTI Ratios for

1. Conforming
2. FHA
3. VA

Answer 8

Conforming - 28/36
FHA - 31/43
VA - 41

Question 9

RESPA. Which regulation? And what are the 4 sections ?

Answer 9

Regulation X

Section 6: Servicing
Section 8: Kickbacks & Affiliation
Section 9: Title
Section 10: Escrow

Question 10

What are Basis points?

Answer 10

Used in the secondary market. 1/100th of a point.

100 basis points= 1%

Question 11

If unit is owner occupied, how long do you have to move in?

Answer 11

60 Days

Question 12

Four C’s of Underwriting

Answer 12

Credit
Capacity
Cash
Collateral

Question 13

A complete application includes what

Answer 13

ALIENS:
Address
Loan Amt
Income
Estimate of value of property
Name
Social Security

Question 14

Gross adjusted monthly income for secondary sources of income (commissions/overtime/pensions/capital gains/child support/alimony/etc) is calculated how?

Answer 14

Average of last 2 years

Question 15

What must be proven with child support and alimony payments in order to be used as a source of income?

Answer 15

Must prove that he was received in the past 2 years and that you will continue to receive for the next 3 years.

Question 16

How much of rental income can be used as income?

Answer 16

75% of net income.

Net Income= (Gross Rental Income - PITI)*75%

Question 17

Tax free income can be grossed up how much ?

Answer 17

25%

Question 18

What forms are used for verification of income

Answer 18

VOE - FNMA form 1005
Taxes 1040 -> 4506T
W2’s, 1099
Pay stubs
Bank statements 
Credit reports

Question 19

Minimum credit score for conforming loans and FHA

Answer 19

Conforming - 620

FHA - 580-

Question 20

How long does bankruptcy stay on credit report ? Ch. 7 vs ch. 13

Answer 20

Ch. 7 is a judgment. 10 years

Ch. 13 is reorganization. 7 years.

Question 21

How much in reserves is needed after closing.

Answer 21

Owner occupied - 2 months

Investor - 6 months

Question 22

Which insurance policy is required and for long ?

Answer 22

Flood insurance. Required for the life of the loan.