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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

  1. A borrower applies for a VA loan and has no remaining entitlement. What option is available to obtain a VA loan?

    Answer: The borrower may use a bonus entitlement or restore entitlement by selling the prior property

    Veterans can restore entitlement by selling the home secured by the prior VA loan or, in some cases, use remaining bonus (second-tier) entitlement.

  2. Which automated underwriting system (AUS) is used primarily by Freddie Mac?

    Answer: Loan Prospector / Loan Product Advisor (LPA)

    Freddie Mac uses Loan Product Advisor (LPA), while Fannie Mae uses Desktop Underwriter (DU) as their respective AUS platforms.

  3. A borrower receives child support income. What documentation is needed for it to be used as qualifying income?

    Answer: Court order or divorce decree and 12 months of receipt history with evidence of continuance for 3 years

    Child support income requires a court order, evidence it has been received consistently for 12 months, and at least 3 years of continuance remaining.

  4. What does the term 'ability to repay' (ATR) require lenders to do under the Dodd-Frank Act?

    Answer: Make a reasonable, good-faith determination that the borrower can repay the loan

    ATR requires lenders to make a good-faith, documented determination that borrowers have the financial ability to repay the loan before consummation.

  5. An underwriter conditions a file for 'satisfactory completion' of a new roof. Which appraisal report type is most appropriate for this situation?

    Answer: Subject-to appraisal conditioned on completion of repairs

    A subject-to appraisal values the property as if the specified repairs have been completed, allowing the loan to close contingent on that work.

  6. Which scenario would most likely result in a 'refer with caution' finding from an FHA AUS (Total Scorecard)?

    Answer: A borrower with a 580 credit score, 55% DTI, and minimal reserves

    A low credit score combined with high DTI and minimal reserves presents multiple risk layers that Total Scorecard will flag for manual review.

  7. What is the primary function of a mortgage underwriter's 'conditions prior to closing' (CTC) list?

    Answer: To specify outstanding items the borrower must satisfy before the loan can fund

    Prior-to-closing conditions are specific items (documents, verifications, or actions) the borrower must satisfy before the lender will allow the loan to fund.