CMPS CMPS Credit Analysis and Underwriting Standards Questions and Answers 1 — Questions and Answers
Question 1: What is the maximum debt-to-income (DTI) ratio typically allowed for a conventional conforming loan under standard Fannie Mae guidelines?
- 36%
- 43%
- 45%
- 50% (Correct answer)
Correct answer: 50%
Fannie Mae's Desktop Underwriter (DU) allows DTI ratios up to 50% for conventional loans when compensating factors are present.
Question 2: Which credit score model is most commonly used by mortgage lenders when evaluating a borrower's creditworthiness?
- VantageScore 3.0
- FICO Score 8
- FICO Score 2/4/5 (Classic) (Correct answer)
- Experian PLUS Score
Correct answer: FICO Score 2/4/5 (Classic)
Mortgage lenders use legacy FICO Score versions — FICO 2 (Experian), FICO 4 (TransUnion), and FICO 5 (Equifax) — not the newer FICO Score 8.
Question 3: When a lender uses the 'middle score' rule for a joint mortgage application, which score is selected?
- The highest score among all borrowers
- The middle of each borrower's three bureau scores, then the lowest of those middles (Correct answer)
- The average of all six bureau scores
- The primary borrower's highest score
Correct answer: The middle of each borrower's three bureau scores, then the lowest of those middles
Each borrower's middle score is identified from the three bureaus, then the lowest middle score among all borrowers is used for qualification.
Question 4: A borrower has a 30-day late payment on a credit card 14 months ago. Under standard FHA underwriting guidelines, this will most likely:
- Automatically disqualify the borrower
- Require a letter of explanation but not disqualify (Correct answer)
- Add 50 basis points to the rate
- Require 12 months of perfect payment history before approval
Correct answer: Require a letter of explanation but not disqualify
A single 30-day late beyond 12 months ago is typically addressed with a letter of explanation and does not automatically disqualify the borrower under FHA guidelines.
Question 5: What does a 'tri-merge' credit report provide that a single-bureau report does not?
- Higher credit scores due to averaging
- Trade lines from all three major bureaus combined into one report (Correct answer)
- Access to FICO Score 10
- Insurance risk scores alongside credit scores
Correct answer: Trade lines from all three major bureaus combined into one report
A tri-merge report aggregates trade line data from Equifax, Experian, and TransUnion into one document, giving underwriters a complete credit picture.
Question 6: Which factor carries the greatest weight in calculating a FICO credit score?
- Length of credit history (15%)
- Credit mix (10%)
- Payment history (35%) (Correct answer)
- Amounts owed (30%)
Correct answer: Payment history (35%)
Payment history is the single largest component of a FICO score at 35%, making on-time payments the most impactful factor a borrower can control.
CMPS CMPS Credit Analysis and Underwriting Standards Questions and Answers 1
What is the maximum debt-to-income (DTI) ratio typically allowed for a conventional conforming loan under standard Fannie Mae guidelines?