Loan Origination & Underwriting

Question 1

A borrower’s net worth is determined by subtracting ________ from _______.

Answer 1

liabilities / assets

Question 2

__________ are financial obligations or debts owed by a borrower.

Answer 2

Liabilities

Question 3

______ are considered any reoccurring monetary obligations that cannot be
canceled.

Answer 3

Debts

Question 4

Underwriters want to confirm that the borrowers have sufficient ______ and __________ to make a down payment on the property and pay closing cost, without having to borrow.

Answer 4

assets / personal money

Question 5

Underwriters want to confirm that the borrower will have adequate reserves, usually ________ of PITI, after making the down payment and closing cost.

Answer 5

2 months

Question 6

For investment properties, __________ of PITI payments must be verified for loans on non-owner-occupied property.

Answer 6

6 months

Question 7

Consumer debts that have less than ________ of payments remaining do not need to be included for the purpose of calculating debt ratios.

Answer 7

10 months

Question 8

If the credit report does not show a required minimum payment amount, the lender should use an amount equal to ___ of the outstanding balance.

Answer 8

5%

Question 9

Lease payments must ______ be considered a recurring monthly debt obligation, regardless of the number of months remaining on the lease.

Answer 9

always

Question 10

At a minimum, the borrower should have ________ of mortgage payments after closing as reserves in a bank or brokerage account.

Answer 10

2 months

Question 11

A durable source of income can be ______________ for a sustained period. Permanent disability, retirement earnings, and interest on established investments clearly are durable types of income. Temporary unemployment benefits are unlikely to be counted.

Answer 11

expected to continue

Question 12

To be considered durable, bonus, commission, and part-time earning types of income must be shown to have been a consistent part of the borrower’s earnings for _________.

Answer 12

2 years

Question 13

___ of ownership in a business is required for an individual to be considered self-employed. Verification of income requires ______ of personal and business income tax returns.

Answer 13

25% / 2 years

Question 14

Employment income must be verifiable for the past __________. Any source of income which is not verifiable is ____________ to the lender.

Answer 14

2 tax years / not acceptable

Question 15

Commission, Overtime, Bonus, Part-time, Interest and Dividend income must be _____________.

Answer 15

averaged over 2 years

Question 16

Retirement and pension income must continue for __________ beyond the application date in order to be included as income.

Answer 16

3 years

Question 17

Receipt of alimony or child support payments must continue for _______ beyond the application date in order to be included as income.

Answer 17

3 years

Question 18

As it relates to rental income – the underwriter will only consider ___ of rental income collected. The other ___ us considered vacancy factor.

Answer 18

75% / 25%

Question 19

Public Assistance income is “grossed up” by ____ (increased by __%) during underwriting.

Answer 19

1.25 / 25%

Question 20

The applicant will most likely be required to sign one or two IRS forms: an ______ (Request for Transcript of Tax Return) and/or an ______ (Tax Information Authorization) so that the lender can verify the income.

Answer 20

IRS 4506-T / IRS 8821

Question 21

The acquisition cost is defined as the __________ needed to purchase property, including down payment, loan amount, and any allowable buyer- paid closing costs.

Answer 21

total amount

Question 22

The Housing Expense Ratio = PITI ÷ Gross Monthly Income. Fannie Mae requires a maximum of ___ and FHA is ___. The VA does not consider it.

Answer 22

28% / 31%

Question 23

Points are used to lower interest rates and each point will lower the rate by ____.

Answer 23

0.25%

Question 24

All origination points must be lumped together as the ___________ on the Loan Estimate, while discount points used to buy down the rate must be indicated as a charge that the _________ incurs for the interest rate selected.

Answer 24

origination fee / borrower

Question 25

Buy down points (temporary points), for example, are shown as FHA 2-1. Buy down points allow a purchaser to reduce the interest rate on a mortgage by ___ for the first year, ___ for the next year, and ___ every year thereafter.

Answer 25

2% / 1% / 0%