Underwriting Principles 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 Principles flashcards as text
What is the maximum seller concession allowed on a conventional loan with an LTV of 75%?
Answer: 9%
Fannie Mae allows up to 9% in seller concessions when LTV is 75% or less for a primary or second home purchase.
An FHA loan requires a minimum credit score of 580 for maximum financing. What down payment does this correspond to?
Answer: 3.5%
FHA borrowers with a 580+ credit score qualify for the minimum 3.5% down payment; below 580 requires 10% down.
When underwriting an investment property, how is rental income from the subject property typically treated for qualification?
Answer: 75% of market rent is used, offsetting the PITI payment
Most guidelines allow 75% of projected or actual rent (a vacancy/maintenance factor) to offset the investment property's housing expense.
Which underwriting red flag would most likely trigger a fraud investigation?
Answer: Inflated purchase price with large seller concessions concealing a kickback
Purchase price inflation combined with excessive seller concessions to conceal undisclosed cash-back arrangements is a classic mortgage fraud pattern.
A borrower's credit report shows a collection account for $800. Under most conventional guidelines, what is required?
Answer: Medical collections are generally excluded from DTI calculation
Fannie Mae and Freddie Mac guidelines generally exclude medical collection accounts from the DTI calculation and do not require payoff.
What is the key difference between a full documentation loan and an alternative documentation loan?
Answer: Full doc uses standard income verification; alt doc uses bank statements or asset depletion
Full documentation loans use W-2s and tax returns, while alternative documentation programs verify income through bank statements or asset depletion methods.
Under Regulation B (ECOA), an underwriter must notify an applicant of an adverse action within how many days of receiving a completed application?
Answer: 30 days
ECOA/Regulation B requires lenders to provide adverse action notices within 30 days of receiving a completed application.