81 Questions
What is the best way to calculate annual income from commission?
Multiply by 52 and divide by 12
What is the purpose of the front-end ratio?
To measure the portion of income used for housing expenses
A borrower with 25% or more ownership in a business is considered:
Self-employed
What is the minimum ownership percentage required for a borrower to be considered self-employed?
25%
What is the best way to calculate annual income for a borrower who earns commission?
Multiply the commission amount by 52 and divide by 12
What is the purpose of the front-end ratio in mortgage underwriting?
To measure the portion of income used for housing expenses
What is the ownership threshold for a borrower to be considered self-employed?
25% or more
What is a requirement for using bank statements as proof of income?
The borrower's position must validate the probability of a cash-based business
What is the combined loan-to-value ratio (CLTV)?
The relationship between all loan balances and the value of the property
What is required to include alimony or child support as income for mortgage qualification?
All of the above
What is the purpose of the front-end ratio in mortgage underwriting?
To determine the maximum monthly mortgage payment a borrower can afford
What is the minimum ownership percentage required for a borrower to be considered self-employed?
25%
What is the best way to calculate annual income from commission?
Use the average of the past 2 years' commissions
Which of the following is the most acceptable form of documentation for a borrower to qualify for a mortgage?
A 12-month payment history and legal documents
To use income from notes receivable for mortgage qualification, a borrower must provide:
A copy of the note and 12 months of payment proof
For interest and dividends to be considered as income, what is required?
Tax returns or account statements showing a 2-year history
Which of the following is NOT acceptable as rental income documentation?
Income from roommates
A self-employed borrower must provide what to use their income for mortgage qualification?
A two-year full tax return
Bank statements can be used as proof of income under what condition?
If the borrower is self-employed
What does VOE stand for in mortgage processing?
Verification of Employment
How do you calculate gross monthly income for someone paid biweekly?
Multiply by 26 and divide by 12
The front-end ratio in mortgage qualification measures:
Housing expenses to income
LTV stands for:
Loan-to-Value
The back-end ratio includes:
Housing expenses plus other credit obligations
Which income source cannot be used for qualification if it will discontinue within 3 years?
Commission income
What documentation is typically required to verify income for mortgage qualification?
12-months or 24-months bank statements
What does the acronym VOE stand for in mortgage lending?
Verification of Employment
For someone paid biweekly, how is their gross monthly income calculated?
Multiply the biweekly pay by 26 pay periods and divide by 12 months
What does the front-end ratio represent in mortgage qualification?
Housing expenses divided by gross monthly income
What does the acronym LTV stand for in mortgage lending?
Loan-to-Value
How is the back-end ratio calculated for mortgage qualification?
Housing expenses plus other credit obligations divided by gross monthly income
Which of the following statements about verifying commission income is true?
Commission income can be verified using one year of tax returns
What is the purpose of calculating the front-end ratio?
To measure the portion of income used for housing expenses
Which of the following statements about self-employment is true?
A borrower with 25% or more ownership in a business is considered self-employed
What is the minimum ownership percentage required for a borrower to be considered self-employed?
25%
Which of the following is NOT a valid method for calculating annual income from commission?
Estimating based on the highest paycheck
How is rental income for mortgage qualification typically calculated?
Using the property's potential rental value
When considering bank statements as proof of income, what type of borrowers are typically targeted?
Borrowers likely running a cash-based business
What does CLTV ratio represent in mortgage qualification?
The relationship between all loan balances and the property's value
Why is a compensating factor important in mortgage qualification?
To offset a high LTV
How is monthly income calculated for someone paid on a weekly basis?
From their weekly pay amount
How can a borrower use income from notes receivable for mortgage qualification?
By providing a copy of the endorsed and binding note and proof of 12 months of payments
What documentation is needed to use interest and dividends as income for mortgage qualification?
Tax returns or account statements showing a 2-year history
What is not acceptable as rental income documentation for mortgage qualification?
Income from roommates and boarders
What is required for a self-employed borrower to use their income for mortgage qualification?
A two-year full tax return
What can some loan programs use as proof of income?
Bank statements
What is required for a borrower to use income from notes receivable for mortgage qualification?
The borrower must provide a promissory note
To qualify for a mortgage, what is needed for the borrower to use interest and dividends as income?
The borrower must provide tax returns and account statements
Which of the following is NOT an acceptable form of rental income documentation for mortgage qualification?
A letter from the borrower's friend confirming rental income
What is a requirement for a self-employed borrower to use their income for mortgage qualification?
The borrower must provide two years of tax returns
Under what condition can bank statements be used as proof of income for loan programs?
If the bank statements show consistent deposits and cash flow
What documentation is required to use income from notes receivable for mortgage qualification?
A copy of the note showing the amount, term, and income stream
What is required to include interest and dividends as income for mortgage qualification?
Tax returns for the most recent two years
How is rental income for mortgage qualification typically calculated?
Using the borrower's Schedule E of the Form 1040
What is a requirement for a self-employed borrower to use their income for mortgage qualification?
Providing tax returns for the most recent two years
Under what condition can bank statements be used as proof of income for a mortgage loan?
If the borrower is likely running a cash-based business
For a borrower to use income from notes receivable for mortgage qualification, what documentation must be provided?
A copy of the note and 12 months of payment proof
Which of the following is NOT acceptable documentation for using interest and dividends as qualifying income?
A written estimate of future earnings from investments
Which of the following is acceptable documentation for using rental income to qualify for a mortgage?
Both B and C are acceptable rental income documentation
For a self-employed borrower to use their income to qualify for a mortgage, what is required?
A two-year history of personal tax returns
How can a borrower use income from notes receivable for mortgage qualification?
The borrower must provide the original note and evidence of receipt of payments for the past 12 months
Under what condition can bank statements be used as acceptable proof of income for mortgage qualification?
When there is a consistent monthly income stream deposited
What documentation is needed to use interest and dividends as income for mortgage qualification?
The borrower must provide the last 2 years' tax returns showing a consistent history of interest and dividend income
What is required for a self-employed borrower to use their income for mortgage qualification?
The borrower must provide at least 2 years of personal and business tax returns
What type of borrowers are typically targeted when using bank statements as proof of income?
Self-employed borrowers without traditional employment documentation
Which income source cannot be used for qualification if it will discontinue within 3 years?
Retirement or social security income
To use income from notes receivable for mortgage qualification, a borrower must provide:
Both a copy of the promissory note and proof of receipt of payments for the past 12 months
For interest and dividends to be considered as income, what is required?
Both proof of ownership and two years of consistent receipt
Which of the following is NOT acceptable as rental income documentation?
Borrower's self-prepared rental income schedule
A self-employed borrower must provide what to use their income for mortgage qualification?
Two of the three: tax returns, profit and loss statement, or business bank statements
What is a requirement for using bank statements as proof of income?
The borrower's deposits must show a consistent source
What documentation is required to use income from notes receivable for mortgage qualification?
Copies of the notes and evidence of regular payments
What is required to include interest and dividends as income for mortgage qualification?
Two years of tax returns showing the income
Which of the following is NOT acceptable as rental income documentation for mortgage qualification?
A note from the property manager
What is required for a self-employed borrower to use their income for mortgage qualification?
Two years of personal tax returns
Which of the following loan programs can use bank statements as proof of income?
Jumbo loans
What is the ownership threshold for a borrower to be considered self-employed?
25%
How can a borrower use income from notes receivable for mortgage qualification?
Provide copies of the notes and evidence of regular payments
What is the purpose of the front-end ratio in mortgage underwriting?
To measure the portion of income used for housing expenses
Which income source cannot be used for qualification if it will discontinue within 3 years?
Alimony or child support
What is the best way to calculate annual income from commission?
Multiply by 52 and divide by 12
Test your knowledge on the requirements for using alimony, child support, notes receivable, and other sources of income for mortgage qualification. Questions cover documentation needed and eligibility criteria.
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