Mortgage Loan Underwriting and Approval Flashcards
Its importance in the application process, and how it ultimately chooses whether an application is approved or declined.
Once an applicant has applied for a loan, the application enters the underwriting stage of the mortgage application process. What is mortgage loan underwriting?
A. A close look at the financials of the applicant.
B. A judgement of how risky lending to a client will be.
C. The legal speech of mortgage loans.
D. A lender is teaching an applicant about mortgage laws.
E. A & B.
Answer: E
E is correct, as underwriting is unrelated to legal speak or ensuring the
applicant is aware of the mortgage process. Underwriting is the stage after
the origination appointment where an underwriter will look closer at the
applicant’s financials and judge the client’s riskiness and whether they
would approve a loan application from that analysis. This is also where the
final draft of the mortgage terms is written up, so it approved it can be
looked over and approved during the loan closing.
The underwriting stage of the mortgage loan application is the longest part. How long does the underwriting process last?
A. Up to sixty days.
B. Five days.
C. Ten days.
D. One month.
E. All of the above.
Correct answer: E
E is correct because it takes up to sixty days for the underwriting process to
complete depending on many factors that may delay or speed up the
process. Most applications will take a week at most, but can be delayed by
the type of loan, how quickly the applicant responds to queries by the
underwriter, and the quality of the evidence provided
With the importance of the mortgage application weighing heavily on the underwriting process. What does an underwriter look at?
A. The personal details of the applicant and their home life.
B. The credit history of the applicant and their debts.
C. Bank statements, income, assets, and spending history.
D. B & C.
Correct answer: D
D is correct because an underwriter needs to assess the applicant’s abilities
to take on a hefty loan while also seeing that they will be good borrowers
that always repay their loans. They cannot allow personal details such as
marriage, age, and sex to weigh in on their decision.
If an applicant were to receive conditional approval, what does that mean?
A. An underwriter is happy with the application but needs some extra
information.
B. An underwriter wants the applicant to accept a higher mortgage rate before approval.
C. The mortgage application is approved, and the applicant does not need anything else.
D. An applicant should make a higher down payment so the application will be approved.
Correct answer: A
A is correct, as when an applicant gets a conditional approval update on
their mortgage loan application, they will need to provide extra information
to the underwriter before the application can be finalized. This may include
extra documents or double-checking submitted details, and once these are
fixed, the reexamination can begin
When an application is returned, there are more outcomes than just ‘approved’ or ‘declined.’ Of these other outcomes, what does a suspended application mean?
A. A mortgage application has been put on hold due to missing information.
B. Unlawful practices by the lender.
C. The lender is on holiday.
D. Unverified employment or application details.
E. All except C.
Correct answer: E
E is correct, as in most cases for a suspended application, an underwriter
may not have enough information to make the proper credit and financial
checks. This could include incorrect details, some missing documents, or
unverified employment. It could also be due to rare examples of lender
malpractice. However, it is never simply because someone is on holiday.
At the end of the underwriting stage, if a client’s application is declined, is an underwriter’s decision final?
A. Yes.
B. No.
C. It depends.
Correct answer: A.
A is correct, as in 99% of cases, the underwriter has the final say about the
status of an application based on their knowledge of the law and their
experience. They are working not just for the good of the client but also for
their business, which relies on approving applicants where they can
guarantee repayments will be made. It would be hard to argue with a
declined application unless a client feels discriminated against, so they
should follow the ECOA and FHA for advice.
Where can an underwriter get the latest updates for official underwriting standards?
A. The official Mortgage Underwriting Act.
B. The Federal Deposit Insurance
Corporation (FDIC) guidelines.
C. The Federal Deposit Insurance Act of 1954.
D. Standards set by banks and financial institutions.
E. B & D.
Correct answer: E
E is correct, as The FDIC has published recommended guidelines for
underwriting standards in the mortgage lending laws. However, many banks
and financial institutions have also set their own standards, so the exact
criteria for an approved home loan may vary slightly from place to place.
