National Exam Practice Test

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Holly
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10056
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National Exam Practice Test
Updated:
2010-03-12 10:59:48
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mortgage
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National Mortgage Exam Practice Test
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  1. In which of the following instances would a borrower be required to obtain flood insurance?


    A. the lender determines it will require flood insurance on all conforming loans
    B. the appraiser indicates the property is located in a flood zone
    C. the previous owner had a history of the flooding property
    D. the borrower feels more secure having the additional coverage
    B. the appraiser indicates the property is located in a flood zone
    (this multiple choice question has been scrambled)
  2. Your borrower does not wish to complete the demographics questions in the Government Monitoring section of the 1003. What should you do?


    A. refuse to take the application
    B. tell the borrower his/her loan cannot be funded until the information is obtained
    C. leave the section blank
    D. complete the section based on a visual observation of the borrower
    D. complete the section based on a visual observation of the borrower
    (this multiple choice question has been scrambled)
  3. Which of the following pieces of personal information is a borrower asked to provide voluntarily on the loan application?


    A. race and marital status
    B. race and sex
    C. marital status and age
    D. sex and age
    B. race and sex
    (this multiple choice question has been scrambled)
  4. Front-end DTI is concerned with:


    A. a borrower's ability to make his or her mortgage payment
    B. a borrower's creditworthiness
    C. a borrower's level of income in ratio to his or her total loan payment
    D. a borrower's ability to meet housing expenses based on income
    D. a borrower's ability to meet housing expenses based on income
    (this multiple choice question has been scrambled)
  5. Which of the following would not be found on a credit report?


    A. credit balances relative to available credit
    B. information available in public records
    C. derogatory credit information
    D. payments made to creditors who do not send data to a repository
    D. payments made to creditors who do not send data to a repository
    (this multiple choice question has been scrambled)
  6. How is the mortgage insurance premium on an FHA loan determined?


    A. it is a percentage of the sales price
    B. it is based on the borrower's income
    C. it is based on loan-to-value
    D. it is based on the principle loan amount
    C. it is based on loan-to-value
    (this multiple choice question has been scrambled)
  7. Which of the following would not be included on the loan application?


    A. closing costs
    B. interest rate
    C. purpose of the loan
    D. taxes and insurance
    A. closing costs
    (this multiple choice question has been scrambled)
  8. Appraisers most commonly use which of the following appraisal methods when determining value for conforming loans?


    A. assemblage
    B. sales comparison approach
    C. cost approach
    D. income approach
    B. sales comparison approach
    (this multiple choice question has been scrambled)
  9. Which of the following real estate appraisal approaches considers the replacement value of the property?


    A. sales approach
    B. market approach
    C. cost approach
    D. income approach
    C. cost approach
    (this multiple choice question has been scrambled)
  10. Which of the following best describes the LTV ratio?


    A. it is the ratio of the borrower total debt to monthly income
    B. it is the ratio of the borrower's monthly loan payment to the principle loan balance
    C. it is the ratio of the borrower's principle loan balance to the appraised value of the property
    D. it is the ratio of the borrower's monthly housing expense to monthly income
    C. it is the ratio of the borrower's principle loan balance to the appraised value of the property
    (this multiple choice question has been scrambled)
  11. A borrower's back ratio includes which of the following?


    A. the total amount of debt carried by the consumer
    B. the cost of credit in relation to the value of the loan
    C. principle and interest payments
    D. all consumer debt such as credit card payments and auto loan payments
    A. the total amount of debt carried by the consumer
    (this multiple choice question has been scrambled)
  12. Why would you analyze a borrower's capacity?


    A. To ascertain the maximum loan the borrower could qualify for
    B. To determine if the borrower is financially capable of repaying the loan
    C. To determine the borrower's financial liquidity
    D. To ascertain how much revolving credit the borrower has been previously approved for
    B. To determine if the borrower is financially capable of repaying the loan
    (this multiple choice question has been scrambled)
  13. Your processor indicates that a 1003 cannot be submitted until the Government Monitoring section is completed. Choose
    one category of information that would be provided in this section of the 1003:


    A. Race, gender, ethnicity of the borrower
    B. Age and years of schooling of the borrower
    C. Borrower's name
    D. Type of mortgage and its term
    A. Race, gender, ethnicity of the borrower
    (this multiple choice question has been scrambled)
  14. A couple has qualified for a $245,600 loan. They are told that the broker fee will cost two points. What is the dollar
    amount of the broker fee?


    A. $4,912
    B. $49,120
    C. $491.20
    d. None of the above
    A. $4,912
    (this multiple choice question has been scrambled)
  15. A borrower asks you for a definition of "a point." What would you tell him/her?


    A. It is an incentive earned by loan originators for locking a certain interest rate
    B. It is the incremental measurement used for ARM adjustments
    C. It is 1% of the loan amount
    D. It is the mathematical conversion of a finance charge to APR
    C. it is 1% of the loan amount
    (this multiple choice question has been scrambled)
  16. Why would a borrower pay discount points in conjunction with his/her loan transaction?


    A. They would increase monthly payments but decrease the amount of interest owed
    B. They would be used to pay closing costs
    C. They would compensate the mortgage broker for their services
    D. They would change the note rate
    D. they would change the note rate
    (this multiple choice question has been scrambled)
  17. Which of the following provisions is available to a borrower when the subject property is located in a flood zone and
    flood insurance is required?


    A. FEMA's National Flood Insurance Program
    B. Home owner's liability policy
    C. Hazard insurance coverage
    D. State Flood Insurance Agency
    A. FEMA's National Flood Insurance Program
    (this multiple choice question has been scrambled)
  18. What factor do lenders analyze in order to determine if a borrower will be financially able meet the demands of loan
    repayment?


    A. Size of the loan the borrower is applying for
    B. Value of the subject property
    C. Length of the loan term
    D. Size of the borrower's existing debt burden
    D. size of the borrower's existing debt burden
    (this multiple choice question has been scrambled)
  19. How does FHA determine the amount of upfront mortgage insurance a borrower will pay?


    A. According to the borrower's credit score
    B. By the asking price of the property
    C. On a sliding scale based on the borrower's income
    D. By loan-to-value
    D. by loan-to-value
    (this multiple choice question has been scrambled)
  20. Appraisals which use the sales comparison approach include which of the following?


    A. An analysis of what it would cost to rebuild the property
    B. Comparison of the national home average home value against the subject property
    C. Review of recently listed real estate prices within a specific geographic area
    D. Comparison of value for three similar, recently sold properties
    D. comparison of value for three similar, recently sold properties
    (this multiple choice question has been scrambled)
  21. The cost approach to appraisal includes which of the following?


    A. The value of the lot plus the replacement cost of the improvements
    B. Analysis of revenue generated by the property
    C. A comparison of the national average for sales of similar properties
    D. A value comparison with several comparable properties
    A. the value of the lot plus the replacement cost of the improvements
    (this multiple choice question has been scrambled)
  22. Under what circumstances may a mortgage professional request information concerning an applicant's former spouse?


    A. When the applicant is including child support from the former spouse as income
    B. If the former spouse is providing gift funds for the applicant's down payment
    C. If the applicant is recently divorced
    D. When the applicant has neglected to include the former spouse's income on the loan application
    A. when the applicant is including child support from the former spouse as income
    (this multiple choice question has been scrambled)
  23. In order to meet fair lending requirements, a credit scoring system must be based on which of the following tests?


    A. Validity test
    B. Credit test
    C. System performance test
    D. System compliance test
    A. validity test
    (this multiple choice question has been scrambled)
  24. Why would a borrower agree to pay private mortgage insurance?


    A. So they can qualify for a lower interest rate
    B. In order to make a lower down payment on a property
    C. To use as a compensating factor if their income and credit do not qualify them for a loan program
    D. So they can obtain a guarantee for a subordinate lien
    B. in order to make a lower down payment on a property
    (this multiple choice question has been scrambled)
  25. A borrower is using commission income in order to qualify for a loan. According to conforming underwriting
    guidelines, how long must the income have been received in order to qualify?


    A. At least six months, according to pay stubs
    B. Commission income may not be used to qualify for a conforming loan
    C. At least 12 months as reported on the borrower's tax returns
    D. A minimum of two years as evidenced by W-2s
    C. at least 12 months as reported on the borrower's tax returns
    (this multiple choice question has been scrambled)
  26. Which of the following forms are used to authorize underwriting access to borrower tax documents?


    A. Form 4506-T
    B. Form 1099
    C. Form 4560
    D. Form 4500
    A. form 4506-T
    (this multiple choice question has been scrambled)
  27. Lisa Lincoln is salesperson who is paid 100% commission. What type of documentation would you ask her to
    provide as proof of her income for loan qualification?


    a. W-2s for the past two years and a copy of her last pay stub
    b. Tax returns for the past two years and an affirmation from her employer that the income is likely to
    continue
    c. Her tax return from last year
    d. A detailed verification form from her employer
    b. tax returns for the past two years and an affirmation from her employer that the income is likely to continue
  28. According to the Red Flag Rules, which of the following is a red flag?


    A. The 1003 includes debts not shown on the credit report
    B. The credit report only shows seven years' worth of credit information
    C. The applicant's credit report shows credit accounts opened before he/she was of legal age to obtain credit
    D. The applicant has a number of credit accounts with high balances
    C. the applicant's credit report shows credit accounts opened before he/she was of legal age to obtain credit
    (this multiple choice question has been scrambled)
  29. Sam Miller has an investment property for which he receives rent in the amount of $1,200 per month. He
    wishes to use the rental income as qualifying income. What amount may be used?


    A. $840
    B. $900
    C. $600
    D. $1,200
    B. $900
    (this multiple choice question has been scrambled)
  30. What percentage of rental income may be included by a borrower who has investment properties for the
    purpose of income qualification?


    A. 75%
    B. 50%
    C. 70%
    D. 100%
    A. 75%
    (this multiple choice question has been scrambled)
  31. If a borrower switches from a fixed rate loan to an adjustable rate loan, which of the following must occur?


    A. Send a new GFE, TIL disclosure and any relevant broker disclosures
    B. Send a new GFE, HUD-1 and CHARM booklet
    C. Nothing, as long as the initial disclosures were properly provided
    D. Send a written confirmation of the change
    A. send a new GFE, TIL disclosure and any relevant broker disclosures
    (this multiple choice question has been scrambled)

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