CMA Credit Analysis and Borrower Qualification 1 — Questions and Answers
Question 1: What is the minimum credit score typically required for an FHA loan with a 3.5% down payment?
- 500
- 580 (Correct answer)
- 620
- 640
Correct answer: 580
FHA guidelines require a minimum 580 FICO score for the 3.5% down payment option; scores between 500–579 require 10% down.
Question 2: Which of the following best describes the 'front-end' debt-to-income (DTI) ratio?
- Total monthly debt obligations divided by gross monthly income
- Monthly housing expense divided by gross monthly income (Correct answer)
- Net monthly income minus all debts
- Annual income divided by total loan amount
Correct answer: Monthly housing expense divided by gross monthly income
The front-end (housing) DTI ratio compares only the proposed monthly housing payment (PITI) to the borrower's gross monthly income.
Question 3: What are the five factors used to calculate a FICO credit score, listed in order from most to least impactful?
- Payment history, amounts owed, length of credit history, new credit, credit mix (Correct answer)
- Credit mix, new credit, payment history, amounts owed, length of credit history
- Amounts owed, payment history, new credit, credit mix, length of credit history
- Length of credit history, payment history, credit mix, amounts owed, new credit
Correct answer: Payment history, amounts owed, length of credit history, new credit, credit mix
FICO scores are calculated using payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
Question 4: What is a 'rapid rescore' in the mortgage qualification process?
- A fee-based service that expedites credit report updates to reflect recent paydowns or corrections within days (Correct answer)
- A penalty assessed when a borrower applies for too many loans
- A lender's internal process for recalculating DTI ratios
- A credit bureau service that removes all negative items within 30 days
Correct answer: A fee-based service that expedites credit report updates to reflect recent paydowns or corrections within days
A rapid rescore allows mortgage lenders to submit documentation of account updates to credit bureaus for expedited rescore, often within 3–5 business days.
Question 5: Under conventional lending guidelines, what is the maximum back-end DTI ratio typically allowed without compensating factors?
- 36%
- 43% (Correct answer)
- 45%
- 50%
Correct answer: 43%
Fannie Mae and Freddie Mac conventionally allow up to 43% back-end DTI without compensating factors, though DU/LP may approve higher ratios with strong compensating factors.
Question 6: What does 'tri-merge' credit report mean in mortgage lending?
- A credit report that combines data from Equifax, Experian, and TransUnion (Correct answer)
- A method of averaging three loan applications
- A report that merges credit data with income verification
- A three-year credit history summary
Correct answer: A credit report that combines data from Equifax, Experian, and TransUnion
A tri-merge credit report pulls credit data from all three major bureaus (Equifax, Experian, TransUnion) and combines them into a single report used for mortgage qualification.
CMA Credit Analysis and Borrower Qualification 1
What is the minimum credit score typically required for an FHA loan with a 3.5% down payment?