Loan Origination Process Flashcards
7 cards from real Mortgage practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Loan Origination Process flashcards as text
A borrower is self-employed. Which documents are typically required during origination to verify their income?
Answer: Two years of personal and business tax returns plus a year-to-date P&L
Self-employed borrowers must typically provide two years of personal and business tax returns plus a year-to-date profit and loss statement.
What is the purpose of a 'gift letter' during the mortgage origination process?
Answer: To confirm that down payment funds received as a gift do not require repayment
A gift letter certifies that funds given to help with the down payment are a true gift with no repayment obligation, satisfying lender requirements.
Under ECOA, within how many days must a lender notify an applicant of adverse action on a mortgage application?
Answer: 30 days
The Equal Credit Opportunity Act requires lenders to provide adverse action notice within 30 days of receiving a completed application.
Which origination scenario best illustrates 'steering' under RESPA and CFPB guidelines?
Answer: A loan officer directing a borrower to a higher-cost product to earn a larger commission
Steering occurs when a loan originator directs a borrower into a less-suitable, higher-cost loan product for the originator's financial benefit.
What is the significance of the 'application date' in the TRID origination timeline?
Answer: It triggers the three-business-day window to deliver the Loan Estimate
Once all six TRID application triggers are received, the application date starts the three-business-day clock for issuing the Loan Estimate.
A borrower's credit report shows a 30-day late payment from 18 months ago. How might an underwriter typically address this during origination?
Answer: Require a written explanation (Letter of Explanation) from the borrower
Underwriters commonly require a Letter of Explanation (LOX) for derogatory credit events so they can assess whether it represents an ongoing pattern.
In a purchase transaction, when does the lender typically order the title search during origination?
Answer: After the purchase contract is executed and the application is received
The title search is typically ordered during processing, after a signed purchase contract provides the property details needed for the search.