CMPS Client Assessment & Loan Structuring 2 — Questions and Answers
Question 1: A self-employed borrower shows strong business revenue but minimal personal tax returns due to deductions. Which loan program best addresses this scenario?
- Conventional conforming loan
- Bank statement loan (Correct answer)
- FHA loan
- USDA rural loan
Correct answer: Bank statement loan
Bank statement loans use 12-24 months of bank deposits to qualify self-employed borrowers instead of tax return income.
Question 2: When calculating a borrower's effective income from overtime pay, what is the standard documentation period required by most lenders?
- 6 months
- 1 year
- 2 years (Correct answer)
- 3 years
Correct answer: 2 years
Most lenders require a 2-year history of overtime pay and confirmation it is likely to continue to use it as qualifying income.
Question 3: A client wants to maximize cash flow after closing. Which loan structure best achieves this objective?
- 15-year fixed-rate mortgage
- 30-year fixed-rate mortgage (Correct answer)
- Bi-weekly payment schedule on a 15-year loan
- 10-year fixed-rate mortgage
Correct answer: 30-year fixed-rate mortgage
A 30-year fixed-rate mortgage produces the lowest required monthly payment, maximizing the borrower's retained monthly cash flow.
Question 4: Which of the following best describes the purpose of a loan comparison worksheet in the CMPS planning process?
- To disclose the lender's profit margin
- To help clients evaluate multiple loan options side by side (Correct answer)
- To satisfy RESPA disclosure requirements
- To document the borrower's credit history
Correct answer: To help clients evaluate multiple loan options side by side
A loan comparison worksheet allows clients to objectively compare costs, payments, and long-term financial impact of different mortgage options.
Question 5: A borrower has a DTI ratio of 48% and is applying for a conventional loan. What is the most appropriate next step for the mortgage planner?
- Deny the application immediately
- Explore debt payoff scenarios or alternative loan programs that allow higher DTI (Correct answer)
- Suggest a shorter loan term to reduce interest
- Recommend a co-borrower with higher income
Correct answer: Explore debt payoff scenarios or alternative loan programs that allow higher DTI
A planner should explore solutions such as paying down debt, increasing income documentation, or using programs with higher DTI thresholds before concluding the client cannot qualify.
Question 6: When structuring a mortgage for a client nearing retirement, which factor should receive the highest priority in the planning conversation?
- Maximizing loan amount to build equity faster
- Aligning the loan payoff date with anticipated retirement income changes (Correct answer)
- Choosing the lowest interest rate available
- Avoiding escrow accounts to reduce monthly outlay
Correct answer: Aligning the loan payoff date with anticipated retirement income changes
For pre-retirees, aligning the mortgage payoff or payment structure with projected retirement income ensures long-term sustainability.
Question 7: Which client scenario would most benefit from an adjustable-rate mortgage (ARM) recommendation?
- A first-time buyer planning to stay in the home for 30 years
- A client who plans to sell or refinance within 5-7 years (Correct answer)
- A borrower with a variable income seeking payment stability
- A retiree on a fixed pension income
Correct answer: A client who plans to sell or refinance within 5-7 years
ARMs offer lower initial rates that benefit clients with a defined short-term ownership horizon before the rate adjustment period begins.
CMPS Client Assessment & Loan Structuring 2
A self-employed borrower shows strong business revenue but minimal personal tax returns due to deductions.
Which loan program best addresses this scenario?