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
What does the acronym 'DTI' stand for in mortgage underwriting?
Answer: Debt-to-income
DTI (debt-to-income) ratio compares a borrower's monthly debt obligations to gross monthly income and is a key underwriting metric.
Under conventional underwriting guidelines, the maximum back-end DTI ratio typically allowed without compensating factors is:
Answer: 43%
Conventional loans typically use a 43% back-end DTI as the standard maximum, though DU/LP may approve higher ratios with strong compensating factors.
What is the minimum FICO credit score required for FHA loan eligibility with 3.5% down payment?
Answer: 580
FHA guidelines allow a 3.5% minimum down payment for borrowers with credit scores of 580 or higher; scores between 500-579 require 10% down.
In mortgage underwriting, 'seasoning' of funds typically refers to:
Answer: How long funds have been in the borrower's account
Seasoned funds are those that have been in the borrower's account for a sufficient period (typically 60 days) to verify they are not borrowed or undisclosed gifts.
Which automated underwriting system (AUS) is used by Fannie Mae?
Answer: Desktop Underwriter (DU)
Fannie Mae's automated underwriting system is Desktop Underwriter (DU), while Freddie Mac uses Loan Product Advisor (LPA, formerly LP).
What does LTV stand for, and what does a lower LTV indicate?
Answer: Loan-to-value; lower LTV means greater borrower equity and less lender risk
LTV (loan-to-value) is the loan balance divided by property value; a lower LTV indicates more borrower equity, reducing the lender's default risk.