Loan Officer Underwriting and Qualification Questions and Answers

Question 1

An underwriter is analyzing a self-employed borrower's income for a conventional loan.
The borrower's filed tax returns show a net business income of $80,000 two years ago and $100,000 for the most recent year.
How will the underwriter MOST likely calculate the borrower's qualifying monthly income?

Accepted Answer

Average the two years' income and divide by 12.

Answer

Use the most recent year's income of $100,000 and divide by 12.

Answer

Use the lower income of $80,000 and divide by 12.

Answer

Average the two years' income and divide by 24.

Question 2

A borrower has a gross monthly income of $6,000. Their proposed monthly housing expense (PITI) is $1,800. They also have a $400 monthly car payment and a $200 minimum monthly credit card payment. What is the borrower's back-end debt-to-income (DTI) ratio?

Accepted Answer

40%

Answer

30%

Answer

37%

Answer

45%

Question 3

Which of the following best describes the role of an Automated Underwriting System (AUS) like Fannie Mae's Desktop Underwriter (DU) or Freddie Mac's Loan Product Advisor (LPA)?

Accepted Answer

It analyzes a loan application against investor guidelines and provides a risk assessment and recommendation.

Answer

It provides the final and binding approval or denial of a mortgage loan.

Answer

It orders the property appraisal and title report automatically.

Answer

It generates the final Closing Disclosure and loan documents for the borrower.

Question 4

In the context of the 'Four C's of Underwriting,' which 'C' is most concerned with the borrower's savings, down payment funds, and reserves?

Accepted Answer

Capital

Answer

Credit

Answer

Capacity

Answer

Collateral

Question 5

A loan applicant is applying for a conventional mortgage. They have credit scores of 720 from Equifax, 735 from Experian, and 710 from TransUnion. Which score will the underwriter most likely use to qualify the borrower?

Accepted Answer

The middle score (720)

Answer

The highest score (735)

Answer

The average of the three scores (721.67)

Answer

The lowest score (710)

Question 6

An underwriter is reviewing a loan file and notices several recent, large, non-payroll deposits in the applicant's bank statements. This discovery would be considered a 'red flag' primarily related to which aspect of qualification?

Accepted Answer

Undisclosed debt or unacceptable source of funds

Answer

Credit history

Answer

Property condition

Answer

Employment stability