Loan Underwriting and Processing Flashcards
6 cards from real Mortgage Loan Originator practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Loan Underwriting and Processing flashcards as text
Which of the following income types is typically considered 'stable' for mortgage qualification?
Answer: Two-year history of self-employment income
Self-employment income with a two-year history is considered stable income; lenders average the two years to determine qualifying income.
What is the purpose of a Verification of Employment (VOE) in the loan process?
Answer: To confirm the borrower's current employment status, position, and income
A VOE is sent to the employer to independently verify the borrower's employment status, title, start date, and income details.
In underwriting, a 'layered risk' scenario means:
Answer: Multiple risk factors are present simultaneously, increasing overall loan risk
Layered risk occurs when multiple risk factors (e.g., low credit score + high LTV + minimal reserves) combine, making the loan riskier than any single factor alone.
What document is used to verify a borrower's income from wages and is issued by employers annually?
Answer: W-2
The W-2 form, issued by employers, reports wages and withholdings and is used by underwriters to verify a salaried borrower's annual income.
When qualifying a borrower using rental income, lenders typically use what percentage of gross rental income?
Answer: 75%
Most conventional guidelines allow 75% of gross rental income to account for vacancy and maintenance expenses when qualifying borrowers.
What is the purpose of 'gift funds' documentation requirements in mortgage underwriting?
Answer: To confirm the funds are a true gift and not a loan that would affect DTI
Gift fund documentation (gift letter + donor bank statements) ensures down payment funds are truly gifted and not a loan that would increase the borrower's debt obligations.