CMP CMP - Certified Mortgage Processor Property Types and Eligibility Questions and Answers 2

Question 1

What is the key distinction between a 'second home' and an 'investment property' for mortgage qualification purposes?

Accepted Answer

Second homes must be occupied by the borrower for a portion of the year and cannot be subject to rental agreements

Answer

Investment properties must be in a different state than the primary residence

Answer

Second homes require a higher down payment than investment properties

Answer

There is no underwriting distinction between the two

Question 2

Which property condition would most likely make a home ineligible for FHA financing?

Accepted Answer

The home has peeling paint, a leaking roof, or exposed electrical hazards

Answer

The home is 40 years old

Answer

The home is located in a rural area

Answer

The home has a detached garage

Question 3

What is a 'limited review' for a condominium, and when is it available?

Accepted Answer

A streamlined condo project approval available for lower LTV loans on established projects without full project review

Answer

A shortened appraisal process for new construction condos

Answer

An FHA-specific review for condos under $150,000

Answer

A review only required for investment condos

Question 4

A property being purchased is located in a Special Flood Hazard Area (SFHA). What is the processor's responsibility?

Accepted Answer

Ensure the borrower obtains flood insurance and that the policy meets FEMA and lender requirements

Answer

Decline the loan — SFHA properties are ineligible for conventional financing

Answer

Recommend the borrower purchase a different property

Answer

Order a second appraisal from a flood-certified appraiser

Question 5

What is a 'non-arm's length transaction' and why does it require additional scrutiny during loan processing?

Accepted Answer

A sale between related parties or parties with a pre-existing business relationship, which may inflate the purchase price

Answer

A transaction where the seller is a bank or REO property

Answer

A purchase using a power of attorney

Answer

A transaction where the buyer waives inspection

Question 6

Which property type typically requires a 'project approval' before a lender can offer financing?

Accepted Answer

Condominiums

Answer

Single-family detached homes

Answer

Townhomes with fee simple title

Answer

Manufactured homes on owned land