Practice Test Geeks(CMPS) Certified Mortgage Planning Specialist Practice Test
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Homeowner Cash Flow Scenarios 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 Homeowner Cash Flow Scenarios flashcards as text

  1. A homeowner's adjustable-rate mortgage has a 2/2/5 cap structure currently at 3.5%. What is the maximum interest rate they could ever pay?

    Answer: 8.5%

    The lifetime cap of 5% is added to the start rate: 3.5% + 5% = 8.5% maximum possible rate.

  2. Which scenario best illustrates negative amortization and its cash flow risk to a homeowner?

    Answer: A minimum payment that doesn't cover accrued interest, causing the loan balance to grow

    Negative amortization occurs when the minimum payment is insufficient to cover interest, causing unpaid interest to be added to the principal balance.

  3. A homeowner's PITI payment is $2,200/month. Their gross monthly income is $7,000. Which statement about their housing expense ratio is correct?

    Answer: Their front-end DTI is 31.4%, which is acceptable for FHA loans

    $2,200/$7,000 = 31.4%, which exceeds the 28% conventional guideline but is within FHA's 31% front-end limit (FHA allows up to 31%).

  4. A homeowner is 10 years into a 30-year mortgage. Why does refinancing into a new 30-year loan potentially harm their long-term cash flow despite lowering the monthly payment?

    Answer: They restart amortization, paying more interest over the extended loan life

    Restarting amortization resets the interest-heavy early payment schedule, often resulting in more total interest paid even at a lower rate.

  5. A self-employed homeowner's tax return shows $80,000 net income after $30,000 in business deductions. For mortgage qualification purposes, what income figure do lenders typically use?

    Answer: $95,000 (net plus depreciation add-back)

    Lenders typically add back non-cash deductions like depreciation to net income, so qualifying income is net income plus depreciation add-backs.

  6. A homeowner uses a 5/1 ARM to purchase a home, planning to sell in 4 years. How does this decision optimize their cash flow strategy?

    Answer: They benefit from a lower initial rate without exposure to rate adjustment risk

    Since the homeowner plans to sell before the first adjustment, they capture the lower initial ARM rate while avoiding rate-adjustment risk.

  7. A homeowner's monthly cash flow analysis shows housing expenses consuming 45% of net take-home pay. Which action is most appropriate for a CMPS specialist to recommend first?

    Answer: Conduct a comprehensive budget review to identify expense reduction or income enhancement opportunities

    A comprehensive cash flow and budget review is the appropriate first step before recommending product changes, as it identifies root causes and full financial picture.