National_Exam_Practice_Test.txt

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 borrower feels more secure having the additional coverage


c. the appraiser indicates the property is located in a flood zone


d. the previous owner had a history of the flooding property

c. the appraiser indicates the property is located in a flood zone

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

Which of the following pieces of personal information is a borrower asked to provide voluntarily on the loan application?








a. marital status and age


b. sex and age


c. race and sex


d. race and marital status

c. race and sex

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

Which of the following would not be found on a credit report?








a. information available in public records


b. derogatory credit information


c. credit balances relative to available credit


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

How is the mortgage insurance premium on an FHA loan determined?








a. it is based on loan-to-value


b. it is a percentage of the sales price


c. it is based on the principle loan amount


d. it is based on the borrower's income

a. it is based on loan-to-value

Which of the following would not be included on the loan application?








a. interest rate


b. purpose of the loan


c. closing costs


d. taxes and insurance

c. closing costs

Appraisers most commonly use which of the following appraisal methods when determining value for conforming loans?








a. cost approach


b. income approach


c. sales comparison approach


d. assemblage

c. sales comparison approach

Which of the following real estate appraisal approaches considers the replacement value of the property?








a. market approach


b. sales approach


c. income approach


d. cost approach

d. cost approach

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 principle loan balance to the appraised value of the property


c. it is the ratio of the borrower's monthly loan payment to the principle loan balance


d. it is the ratio of the borrower's monthly housing expense to monthly income

b. it is the ratio of the borrower's principle loan balance to the appraised value of the property

A borrower's back ratio includes which of the following?








a. principle and interest payments


b. the cost of credit in relation to the value of the loan


c. all consumer debt such as credit card payments and auto loan payments


d. the total amount of debt carried by the consumer

d. the total amount of debt carried by the consumer

Why would you analyze a borrower's capacity?








a. To determine if the borrower is financially capable of repaying the loan


b. To ascertain the maximum loan the borrower could qualify for


c. To determine the borrower's financial liquidity


d. To ascertain how much revolving credit the borrower has been previously approved for

a. To determine if the borrower is financially capable of repaying the loan

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

b. Borrower's name


c. Age and years of schooling of the borrower


d. Type of mortgage and its term

a. Race

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. $491.20


b. $4
912

c. $49
120

d. None of the above

b. $4

A borrower asks you for a definition of "a point." What would you tell him/her?








a. It is 1% of the loan amount


b. It is the incremental measurement used for ARM adjustments


c. It is an incentive earned by loan originators for locking a certain interest rate


d. It is the mathematical conversion of a finance charge to APR

a. it is 1% of the loan amount

Why would a borrower pay discount points in conjunction with his/her loan transaction?








a. They would be used to pay closing costs


b. They would compensate the mortgage broker for their services


c. They would change the note rate


d. They would increase monthly payments but decrease the amount of interest owed

c. they would change the note rate

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. Home owner's liability policy


b. FEMA's National Flood Insurance Program


c. State Flood Insurance Agency


d. Hazard insurance coverage

b. FEMA's National Flood Insurance Program

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. Length of the loan term


c. Value of the subject property


d. Size of the borrower's existing debt burden

d. size of the borrower's existing debt burden

How does FHA determine the amount of upfront mortgage insurance a borrower will pay?








a. By the asking price of the property


b. By loan-to-value


c. On a sliding scale based on the borrower's income


d. According to the borrower's credit score

b. by loan-to-value

Appraisals which use the sales comparison approach include which of the following?








a. Comparison of value for three similar
recently sold properties

b. An analysis of what it would cost to rebuild the property


c. Review of recently listed real estate prices within a specific geographic area


d. Comparison of the national home average home value against the subject property

a. comparison of value for three similar

The cost approach to appraisal includes which of the following?








a. A comparison of the national average for sales of similar properties


b. A value comparison with several comparable properties


c. The value of the lot plus the replacement cost of the improvements


d. Analysis of revenue generated by the property

c. the value of the lot plus the replacement cost of the improvements

Under what circumstances may a mortgage professional request information concerning an applicant's former spouse?








a. When the applicant has neglected to include the former spouse's income on the loan application


b. When the applicant is including child support from the former spouse as income


c. If the former spouse is providing gift funds for the applicant's down payment


d. If the applicant is recently divorced

b. when the applicant is including child support from the former spouse as income

In order to meet fair lending requirements
a credit scoring system must be based on which of the following tests?







a. Validity test


b. System compliance test


c. Credit test


d. System performance test

a. validity test

Why would a borrower agree to pay private mortgage insurance?








a. So they can obtain a guarantee for a subordinate lien


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 qualify for a lower interest rate

b. in order to make a lower down payment on a property

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 12 months as reported on the borrower's tax returns


b. A minimum of two years as evidenced by W-2s


c. At least six months
according to pay stubs

d. Commission income may not be used to qualify for a conforming loan

a. at least 12 months as reported on the borrower's tax returns

Which of the following forms are used to authorize underwriting access to borrower tax documents?








a. Form 4560


b. Form 4506-T


c. Form 4500


d. Form 1099

b. form 4506-T

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

According to the Red Flag Rules
which of the following is a red flag?







a. The applicant's credit report shows credit accounts opened before he/she was of legal age to obtain credit


b. The 1003 includes debts not shown on the credit report


c. The applicant has a number of credit accounts with high balances


d. The credit report only shows seven years' worth of credit information

a. the applicant's credit report shows credit accounts opened before he/she was of legal age to obtain credit

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. $1
200

b. $900


c. $840


d. $600

b. $900

What percentage of rental income may be included by a borrower who has investment properties for the


purpose of income qualification?








a. 100%


b. 75%


c. 70%


d. 50%

b. 75%

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. Send a written confirmation of the change


d. Nothing
as long as the initial disclosures were properly provided

a. send a new GFE