Client Financial Advising Flashcards
7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Client Financial Advising flashcards as text
A client's credit report shows a collection account from three years ago. How should a CMC advise the client before applying for a mortgage?
Answer: Consult with the lender because paying off old collections can sometimes reset the derogatory date
Paying off an old collection can update the account's last-activity date, which may temporarily lower the credit score; the CMC should advise coordinating with the lender first.
When calculating a client's qualifying income from rental properties, lenders typically use what percentage of gross rents?
Answer: 75% of gross rental income
Most conventional guidelines allow 75% of gross rental income to account for vacancy and maintenance, with the remaining 25% treated as an expense offset.
A client has recently changed jobs but has been in the same industry for ten years. How should a CMC assess employment stability?
Answer: Employment history in the same field counts positively even with a recent employer change
Lenders evaluate continuity of income in the same field; a job change within the same industry is generally viewed favorably and does not require a two-year wait.
Which of the following best describes the purpose of a Good Faith Estimate (now Loan Estimate) provided to a mortgage client?
Answer: It provides an itemized estimate of loan terms and closing costs within three business days of application
The Loan Estimate (which replaced the GFE under TRID) must be provided within three business days of application and discloses estimated loan terms and costs.
A client is concerned about rising interest rates and asks about protecting their rate. What should a CMC recommend?
Answer: Lock the interest rate to protect against rate increases during the loan process
A rate lock guarantees the agreed interest rate for a specified period, protecting the borrower from market rate increases before closing.
A CMC discovers that a client's bank statements show large undocumented deposits. What is the appropriate course of action?
Answer: Ask the client to provide a written explanation and source documentation for all large deposits
Lenders require borrowers to source and explain large undocumented deposits to confirm funds are not undisclosed loans that would affect DTI.
What does the term 'cash-out refinance' mean in mortgage advising?
Answer: Replacing an existing mortgage with a larger loan and receiving the difference in cash
A cash-out refinance replaces the existing mortgage with a new, larger loan, and the borrower receives the equity difference as cash at closing.