Loan Origination Process Flashcards

Which federal law requires lenders to provide a Loan Estimate within three business days of receiving a mortgage application?

Answer: TRID (TILA-RESPA Integrated Disclosure) rule

The TRID rule, effective October 2015, requires lenders to deliver a Loan Estimate within three business days of application receipt.

During loan origination, what does the term 'pre-qualification' primarily rely on?

Answer: Self-reported borrower information without formal verification

Pre-qualification is an informal assessment based on unverified, self-reported data from the borrower.

A borrower's 'debt-to-income ratio' (DTI) during origination compares monthly debt payments to which figure?

Answer: Gross monthly income before taxes and deductions

DTI is calculated by dividing total monthly debt obligations by gross monthly income (before taxes).

What is the primary purpose of the 'three-day waiting period' after a borrower receives the Closing Disclosure?

Answer: To give the borrower time to review final loan terms before closing

The mandatory three-business-day waiting period lets borrowers compare the Closing Disclosure to their Loan Estimate before signing.

Which origination step involves verifying that the subject property's value supports the requested loan amount?

Answer: Appraisal

An independent appraisal is ordered to confirm the property's market value meets or exceeds the loan amount.

What does 'lock-in' refer to during the mortgage origination process?

Answer: Committing to a specific interest rate for a defined period

A rate lock commits the lender to honor a specific interest rate for a set period, protecting the borrower from rate increases.

Under RESPA, within how many business days must a lender provide a borrower with a Loan Estimate after receiving a completed application?

Answer: 3 business days

RESPA and TRID require delivery of the Loan Estimate within three business days of receiving a complete application.