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Underwriting Decision-Making & Loan Approval Flashcards

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

Read the first 7 Underwriting Decision-Making & Loan Approval flashcards as text
  1. An appraisal comes in $10,000 below the purchase price on a conventional loan. What is the underwriter's most appropriate action?

    Answer: Base the LTV on the appraised value and re-evaluate eligibility

    Conventional guidelines require LTV to be calculated on the lower of appraised value or purchase price, so the underwriter must recalculate eligibility.

  2. Which condition would most likely trigger a referral to a fraud investigation unit during underwriting?

    Answer: Inconsistent employment dates on the application versus the verification of employment

    Inconsistent employment dates between the application and VOE are a red flag for misrepresentation and a hallmark fraud indicator.

  3. A borrower's total monthly obligations are $2,200 and gross monthly income is $6,500. What is their back-end DTI?

    Answer: 34%

    Back-end DTI = $2,200 / $6,500 = 33.85%, which rounds to approximately 34%.

  4. Under Fannie Mae guidelines, what minimum reserve requirement applies after closing for a borrower purchasing a primary residence with a fixed-rate mortgage?

    Answer: No reserves required

    Fannie Mae does not mandate post-closing reserves for a primary residence fixed-rate purchase, though higher-risk loans may trigger DU reserve requirements.

  5. Which of the following best describes a 'suspended' underwriting decision?

    Answer: The underwriter cannot make a decision because critical information is missing or unverifiable

    A suspended decision means the underwriter lacks sufficient information to approve or deny and the file must be updated before a determination can be made.

  6. A borrower owns a rental property with a mortgage payment of $1,500/month and rental income of $1,300/month. How should the net rental loss be treated in qualifying?

    Answer: Add $200 to the monthly obligations in the DTI

    When rental income does not offset the full mortgage payment, the net monthly loss ($200) must be added to the borrower's total monthly obligations.

  7. What does the term 'compensating factors' mean in the context of residential underwriting?

    Answer: Positive loan attributes that offset risk when a guideline threshold is exceeded

    Compensating factors are positive loan characteristics such as large reserves, low LTV, or strong credit history that justify approval despite a guideline exception.