Practice Test Geeks(CRU) Certified Residential Underwriter Practice Test
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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 — missed cards come back until you master them.

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  1. Under USDA Rural Development guidelines, which factor would make a borrower ineligible for a guaranteed loan?

    Answer: Household income exceeding 115% of the area median income

    USDA guaranteed loans are income-limited to households earning no more than 115% of the area median income for the loan area.

  2. An underwriter is reviewing a condominium loan. Which condition would most likely require project approval before the loan can close?

    Answer: The condo project has more than 15% of units in arrears on HOA dues

    Fannie Mae requires that no more than 15% of units be delinquent on HOA dues; exceeding this threshold makes the project ineligible without a waiver.

  3. Which of the following best defines 'layered risk' in residential underwriting?

    Answer: The accumulation of several risk factors in a single loan file that collectively increase default probability

    Layered risk refers to a loan file containing multiple elevated risk factors simultaneously, such as high LTV combined with high DTI and a low credit score.

  4. A borrower is refinancing a property with a current market value of $300,000. The payoff balance is $240,000 and the borrower wants $20,000 cash out. What is the LTV?

    Answer: 83%

    Total loan amount = $240,000 + $20,000 = $260,000; LTV = $260,000 / $300,000 = 86.67%, rounded to approximately 87%.

  5. A borrower receives rental income from a property they have owned for less than one year. How should this income be treated under conventional guidelines?

    Answer: It generally cannot be used for qualifying since a 1-year history is required

    Conventional guidelines generally require a minimum 12-month documented history of rental income before it may be used for qualification.

  6. What is the main underwriting concern with an 'interested party contribution' (IPC) that exceeds agency limits?

    Answer: It artificially inflates the effective purchase price, distorting the true LTV and down payment

    Excess IPCs inflate the effective transaction price, allowing the buyer to bring less cash and distorting the LTV ratio, which increases lender risk.

  7. Under the Fair Housing Act, which underwriting practice is explicitly prohibited?

    Answer: Applying different credit standards based on the racial composition of the neighborhood

    Applying different credit or underwriting standards based on neighborhood racial composition constitutes illegal redlining, which is prohibited by the Fair Housing Act.