Practice Test Geeks(CMC) Certified Mortgage Consultant Practice Test
← All CMC Flashcard Decks

Loan Processing and Underwriting Guidelines Flashcards

7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Loan Processing and Underwriting Guidelines flashcards as text

  1. What is the purpose of mortgage insurance on a conventional loan with LTV above 80%?

    Answer: To protect the lender against borrower default

    Private mortgage insurance (PMI) compensates the lender if the borrower defaults and the foreclosure sale doesn't cover the loan balance.

  2. A borrower is applying for a loan on a 2-unit property to be used as a primary residence. What is the minimum down payment required under FHA guidelines?

    Answer: 3.5%

    FHA requires only 3.5% down for 1-4 unit properties when the borrower occupies one unit as a primary residence and has a qualifying credit score.

  3. Which ratio measures only the borrower's proposed housing expense against gross monthly income?

    Answer: Front-end (housing) DTI ratio

    The front-end ratio compares only PITI (principal, interest, taxes, and insurance) to gross monthly income.

  4. An underwriter is reviewing a file where the appraiser noted deferred maintenance but no required repairs. How does this typically affect conventional loan processing?

    Answer: The loan can proceed as-is; deferred maintenance without required repairs does not hold up approval

    For conventional loans, deferred maintenance noted but not flagged as required repairs does not prevent loan approval under standard guidelines.

  5. What is a 'gift of equity' in the context of mortgage transactions?

    Answer: When a family member sells a property below market value and the difference counts toward the buyer's down payment

    A gift of equity occurs when a family member sells below market value; the equity spread can satisfy the buyer's down payment requirement.

  6. Under Freddie Mac guidelines, which income type requires the underwriter to document a 12-month history of receipt rather than 24 months?

    Answer: Alimony or child support income

    Freddie Mac requires only a 12-month documented history of alimony or child support receipt to use it as qualifying income.

  7. What triggers a 'red flag' requiring an underwriter to request a second appraisal on a conventional purchase loan?

    Answer: A significant increase in value from the most recent sale of the same property within a short time frame

    Rapid appreciation from a recent prior sale—known as a property flip concern—can trigger appraisal desk review or a second appraisal under guidelines.