Underwriting and Qualification 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 Underwriting and Qualification flashcards as text
What is a 'letter of explanation' (LOE) commonly used for in mortgage underwriting?
Answer: To clarify derogatory credit events, large deposits, or gaps in employment to the underwriter
An LOE provides the underwriter with context for unusual items on the application, such as a credit inquiry, job gap, or large bank deposit.
Which loan program allows a debt-to-income ratio above 50% with strong compensating factors via AUS approval?
Answer: FHA loan approved through TOTAL Scorecard
FHA's TOTAL Scorecard can issue an 'Accept' finding allowing DTI above 50% when the borrower has strong compensating factors like high credit score or large reserves.
What is the LTV ratio on a $280,000 loan for a property appraised at $350,000?
Answer: 80%
$280,000 ÷ $350,000 = 0.80 = 80% LTV.
A borrower is purchasing a rental property. How do conventional guidelines typically treat future rental income from that property?
Answer: Generally not counted for qualification unless there is a signed lease and rental history
For a subject investment property, most conventional guidelines require a signed lease and sometimes rental history before counting rental income toward qualification.
What is the difference between a 'hard' credit pull and a 'soft' credit inquiry in the mortgage process?
Answer: Hard pulls affect credit scores and are done with borrower consent; soft pulls do not affect scores
Hard inquiries, like those in a mortgage application, are recorded on the credit report and can slightly lower the score; soft inquiries do not affect scores.
A borrower is 60 days delinquent on a student loan. Under FHA guidelines, how must this be handled?
Answer: The delinquent account must be brought current or placed in a repayment plan before closing
FHA requires that delinquent federal debts, including student loans, be resolved — either brought current or enrolled in an approved repayment plan — prior to loan approval.
What is 'trended credit data' and how does it affect conventional loan underwriting?
Answer: A 24-month history of credit card balance and payment patterns used by Fannie Mae's DU
Fannie Mae's Desktop Underwriter uses trended credit data — 24 months of payment and balance history — to identify whether a borrower is paying down or revolving debt.