Mortgage Underwriting and Qualification 3 — Questions and Answers
Question 1: Which credit score model is most commonly used by mortgage lenders in the U.S.?
- VantageScore 3.0
- FICO Score 8
- FICO Mortgage Score (Versions 2, 4, 5) (Correct answer)
- Experian PLUS Score
Correct answer: FICO Mortgage Score (Versions 2, 4, 5)
Mortgage lenders typically use FICO Score versions 2, 4, and 5 from the three major bureaus, which are mortgage-specific scoring models.
Question 2: What is the minimum credit score generally required for an FHA loan with a 3.5% down payment?
- 500
- 580 (Correct answer)
- 620
- 640
Correct answer: 580
FHA requires a minimum 580 credit score for the 3.5% down payment option; scores between 500–579 require 10% down.
Question 3: In underwriting, what does 'seasoning' of funds refer to?
- The age of the mortgage loan
- How long funds have been in the borrower's account (Correct answer)
- The interest rate adjustment period
- The time since last late payment
Correct answer: How long funds have been in the borrower's account
Seasoning refers to how long assets have been in the borrower's account — typically 60 days — proving they are not borrowed funds.
Question 4: Which of the following is NOT counted in a borrower's monthly debt obligations for DTI calculation?
- Student loan payments
- Car insurance premiums (Correct answer)
- Minimum credit card payments
- Auto loan payments
Correct answer: Car insurance premiums
Insurance premiums are not installment or revolving debts, so they are excluded from the back-end DTI calculation.
Question 5: What triggers an automated underwriting system (AUS) to require manual underwriting?
- A borrower with a perfect credit score
- A 'Refer' or 'Caution' finding from the AUS (Correct answer)
- A conventional loan application
- A salaried W-2 borrower
Correct answer: A 'Refer' or 'Caution' finding from the AUS
When AUS returns a 'Refer' (Fannie Mae) or 'Caution' (Freddie Mac) finding, the file must be manually reviewed by an underwriter.
Question 6: A borrower earns $6,000/month and pays $1,800/month toward all debts including the proposed mortgage. What is their back-end DTI?
- 25%
- 30% (Correct answer)
- 35%
- 40%
Correct answer: 30%
$1,800 ÷ $6,000 = 0.30, or 30% back-end DTI.
Question 7: What is the purpose of the 4506-C form in the mortgage underwriting process?
- To order a property appraisal
- To authorize the IRS to release tax transcripts to the lender (Correct answer)
- To verify the borrower's employment
- To request a credit report
Correct answer: To authorize the IRS to release tax transcripts to the lender
Form 4506-C allows the lender to obtain tax return transcripts directly from the IRS to verify the borrower's reported income.
Mortgage Underwriting and Qualification 3
Which credit score model is most commonly used by mortgage lenders in the U.S.?