Mortgage Mortgage Underwriting and Qualification Questions and Answers 2 — Questions and Answers
Question 1: What is the maximum debt-to-income (DTI) ratio typically allowed for a qualified mortgage under the ATR/QM rule?
- 43% (Correct answer)
- 50%
- 36%
- 28%
Correct answer: 43%
Under the Ability-to-Repay/Qualified Mortgage rule, the general DTI limit for a qualified mortgage is 43%.
Question 2: Which of the following would an underwriter consider a compensating factor when a borrower has a slightly high DTI ratio?
- Significant cash reserves after closing (Correct answer)
- A recent job change to a new industry
- Multiple recent credit inquiries
- A short employment history
Correct answer: Significant cash reserves after closing
Substantial cash reserves demonstrate financial stability and can offset a higher DTI ratio in underwriting.
Question 3: In mortgage underwriting, what does CAIVRS stand for and what is its purpose?
- Credit Alert Interactive Voice Response System — checks for federal debt defaults (Correct answer)
- Consumer Automated Income Verification Review System — verifies income
- Centralized Appraisal Information Verification and Reporting System — validates appraisals
- Credit Analysis and Individual Verification Reporting System — scores creditworthiness
Correct answer: Credit Alert Interactive Voice Response System — checks for federal debt defaults
CAIVRS is a federal database that alerts lenders if a borrower has defaulted on federal debt obligations such as FHA loans or student loans.
Question 4: When underwriting a self-employed borrower, how many years of tax returns are typically required?
- 2 years (Correct answer)
- 1 year
- 3 years
- 5 years
Correct answer: 2 years
Underwriters generally require two years of personal and business tax returns to establish a reliable income pattern for self-employed borrowers.
Question 5: What is the purpose of a Verification of Employment (VOE) in the underwriting process?
- To confirm the borrower's current employment status, position, and income (Correct answer)
- To verify the borrower's educational background
- To check the borrower's criminal history
- To validate the borrower's citizenship status
Correct answer: To confirm the borrower's current employment status, position, and income
A VOE confirms that the borrower is currently employed and verifies their job title, tenure, and income as stated on the application.
Question 6: Which type of income is typically NOT considered stable or qualifying income by mortgage underwriters?
- One-time insurance settlement proceeds (Correct answer)
- Base salary from W-2 employment
- Consistent overtime documented for two years
- Social Security retirement benefits
Correct answer: One-time insurance settlement proceeds
One-time settlement proceeds are non-recurring and cannot be counted as stable qualifying income for mortgage purposes.
Mortgage Mortgage Underwriting and Qualification Questions and Answers 2
What is the maximum debt-to-income (DTI) ratio typically allowed for a qualified mortgage under the ATR/QM rule?