Mortgage Loan Origination Process Flashcards
The mortgage loan origination process is the first part of the mortgage application with many rules and regulations
In the loan origination process, an applicant will require a lot of personal documents to make the mortgage process easier. But what information should an applicant NOT need to give a lender to get a loan?
A. Their name.
B. Their Income.
C. Their Social Security Number.
D. Their property address.
E. The property they want to purchase’s value.
F. Their gender, race, and sexuality.
G. Their desired loan amount and mortgage type.
Answer: F
F is correct, as personal details related to gender, race, and sexuality are not
part of the mortgage lending process and should not have any weight on the
decision of the lender offering a loan or not. All a lender will need is an
applicant’s name, income details with statements, Social Security number,
the property address, the property value, and any personal requests for loan
amounts and mortgage types.
In the application stages of securing a mortgage, what is the purpose
of the origination process for the lender and applicant?
A. For the first deicing meet-and-greet.
B. To check that the seller is not defrauding the applicant.
C. To ensure the applicant can commit to a mortgage loan.
D. To lay out the mortgage lending process.
E. All the above.
Answer: E
E is correct, as the purpose of the origination process is for the lender to
assess their client to see if they can commit to a mortgage and will repay
their loan based on financial evidence. This is the first meeting point
between lender and applicant, so there will be some service quoting and
back-and-forth as the applicant decides if they want to commit to this lender
or loan. During this dialogue between the lender and the applicant, they will
walk through the lending process and look at the property’s condition to
ensure it is a worthwhile investment for the buyer.
A lender should look closely at each loan case they acquire to ensure
that an applicant can commit to a loan. As part of this, is it true that an
applicant must provide proof of income to get approval?
A. True.
B. False.
Correct answer: A
A is correct, as the most important job for a lender is that they can see and prove without a doubt that an applicant will be able to repay their loan. This judgment is made easier by physical proof that the applicant has an income source and a good credit history showing they have repaid debts promptly in the past.
During the loan application process, a client should supply a lot of
documents and supportive evidence. However, what documents does an
applicant not need to provide?
A. W-2s and 1099s.
B. Proof of income through bank statements and pay slips.
C. Twelve months of all their receipts.
D. Photo ID.
Correct answer: C
C is correct, as although the applicant needs to show evidence of their spending history, they do not need to show receipts, as their bank statements and pay slips will be sufficient. They also need to fill in the W-2
and 1099 forms and bring along some photo IDs for the lender to confirm who they say they are.
One of the most important parts of the loan origination stage is the
documents that the lender and applicant must fill in and sign. These
documents ensure:
A. Both parties agree to the initial terms of the loan before underwriting.
B. Both parties finalize the mortgage process.
C. The client will start paying right away.
D. The client will guarantee to the lender they will not back out of the mortgage.
Correct answer: A
A is correct, as the applicant has agreed to the loan terms. However, this is not the final step of the mortgage process, they don’t have to start making payments just yet, and they have a set period to back out before it is made final. The origination process is just the first part of the application process,
and what follows is the wait as the underwriter takes on the case to check
the abilities of the applicant with the evidence provided. Once a loan is approved, the closing stage will be where final contracts will be disclosed and signed.
Applying for a mortgage is a lengthy process with a lot of rules and regulations, but how long does approval usually take for an applicant to get a response to their application?
A. Five working days.
B. Two weeks.
C. Up to sixty days.
D. Six months.
Correct answer: C
C is correct, as the mortgage loan application process takes up to sixty days
to come through, after which time the applicant will be informed whether they have been approved for a loan. However, this is just the average time frame, and it can take even longer if it is a complex case or a busy time of year. A jumbo loan will take a lot longer to approve as this is a risker case that needs extra care to be considered.
Many regard the origination process as the most crucial part of the whole mortgage process. How true is this statement?
A. True.
B. False.
Correct answer: B
B is correct, as although it is an important stage in selling the client on loan,
the title of ‘most important stage’ (if there even is one) would be won by the
underwriting process, which assesses the lending ability of the applicant
and will decide if the lender should approve or decline an application.
There are many laws that regulate and prohibit what a lender can or
cannot charge an applicant. In these laws, can a mortgage originator
assign a fee to an applicant’s loan total?
A. Yes.
B. No.
Correct answer: A
A is correct, as a mortgage originator can charge their applicant a fee of 1%
of the loan’s total amount to pay for their time and aid. This percentage may
vary depending on the mortgage broker and the state.
On the topic of mortgage regulations, there are many laws that help make the lending profession a safer place for lenders and applicants alike. In these laws, Regulation Z is important for many reasons, but what is it NOT?
A. A key piece of legislation from the Truth of Lending Act.
B. A law that protects borrowers from lending overcharging.
C. A law that is unrelated to mortgage lending.
D. Legislation that all lenders must follow not to deceive their clients.
Correct answer: C
C is correct, as Regulation Z is an essential piece of legislation from the Truth of Lending Act that protects borrowers from shady lending practices. This includes overcharging, confusing credit and account charges, and a lender being unclear about what a client is paying for.
