Practice Test Geeks(CMPS) Certified Mortgage Planning Specialist Practice Test
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Debt and Cash Flow Management Flashcards

7 cards from real CMPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Debt and Cash Flow Management flashcards as text

  1. Which debt repayment strategy focuses on paying off the highest-interest debt first while making minimum payments on all others?

    Answer: Avalanche method

    The avalanche method targets the highest-interest debt first, minimizing total interest paid over time.

  2. A client has a $250,000 mortgage at 7% and $30,000 in credit card debt at 22%. A CMPS would most likely recommend which strategy first?

    Answer: Aggressively pay down credit card debt

    The 22% credit card interest rate far exceeds the 7% mortgage rate, making credit card payoff the highest-priority move.

  3. What is the primary purpose of a cash flow statement in mortgage planning?

    Answer: To identify income and expense patterns that affect loan repayment capacity

    A cash flow statement reveals income sources and spending patterns that determine a borrower's true repayment capacity.

  4. A borrower uses a cash-out refinance to pay off $40,000 in student loans. Over 30 years, what financial planning concern should the CMPS raise?

    Answer: The borrower may pay significantly more in total interest by extending 10-year debt over 30 years

    Extending short-term debt into a 30-year mortgage can dramatically increase total interest paid even at a lower rate.

  5. Which ratio measures a business borrower's ability to service debt from operating income, commonly used in self-employed mortgage analysis?

    Answer: Debt service coverage ratio (DSCR)

    DSCR divides net operating income by total debt service obligations, indicating whether income covers debt payments.

  6. A CMPS client has significant credit card balances and is considering a 0% balance transfer offer. What is the most important factor to evaluate?

    Answer: The promotional period length and the rate that applies after it expires

    The post-promotional interest rate and when it applies is the critical risk factor in balance transfer strategies.

  7. Which of the following is considered a 'non-recurring' debt that may be excluded from DTI calculations?

    Answer: A personal loan with 6 months remaining

    Debts with 10 or fewer months remaining are often excluded from DTI calculations under conventional guidelines.