Mortgage Income Verification and Qualification Quiz
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Questions and Answers

What is the best way to calculate annual income from commission?

  • Multiply by 52 and divide by 12 (correct)
  • Add four paychecks together
  • Multiply by 4
  • Estimate based on the highest paycheck

    • What is the purpose of the front-end ratio?

  • To assess the borrower's investment acumen
  • To determine the borrower's entertainment budget
  • To calculate the borrower's savings rate
  • To measure the portion of income used for housing expenses (correct)

    • A borrower with 25% or more ownership in a business is considered:

  • Unemployed
  • Self-employed (correct)
  • Casually employed
  • Part-time employed

    • What is the minimum ownership percentage required for a borrower to be considered self-employed?

    <p>25%</p> Signup and view all the answers

    What is the best way to calculate annual income for a borrower who earns commission?

    <p>Multiply the commission amount by 52 and divide by 12</p> Signup and view all the answers

    What is the purpose of the front-end ratio in mortgage underwriting?

    <p>To measure the portion of income used for housing expenses</p> Signup and view all the answers

    What is the ownership threshold for a borrower to be considered self-employed?

    <p>25% or more</p> Signup and view all the answers

    What is a requirement for using bank statements as proof of income?

    <p>The borrower's position must validate the probability of a cash-based business</p> Signup and view all the answers

    What is the combined loan-to-value ratio (CLTV)?

    <p>The relationship between all loan balances and the value of the property</p> Signup and view all the answers

    What is required to include alimony or child support as income for mortgage qualification?

    <p>All of the above</p> Signup and view all the answers

    What is the purpose of the front-end ratio in mortgage underwriting?

    <p>To determine the maximum monthly mortgage payment a borrower can afford</p> Signup and view all the answers

    What is the minimum ownership percentage required for a borrower to be considered self-employed?

    <p>25%</p> Signup and view all the answers

    What is the best way to calculate annual income from commission?

    <p>Use the average of the past 2 years' commissions</p> Signup and view all the answers

    Which of the following is the most acceptable form of documentation for a borrower to qualify for a mortgage?

    <p>A 12-month payment history and legal documents</p> Signup and view all the answers

    To use income from notes receivable for mortgage qualification, a borrower must provide:

    <p>A copy of the note and 12 months of payment proof</p> Signup and view all the answers

    For interest and dividends to be considered as income, what is required?

    <p>Tax returns or account statements showing a 2-year history</p> Signup and view all the answers

    Which of the following is NOT acceptable as rental income documentation?

    <p>Income from roommates</p> Signup and view all the answers

    A self-employed borrower must provide what to use their income for mortgage qualification?

    <p>A two-year full tax return</p> Signup and view all the answers

    Bank statements can be used as proof of income under what condition?

    <p>If the borrower is self-employed</p> Signup and view all the answers

    What does VOE stand for in mortgage processing?

    <p>Verification of Employment</p> Signup and view all the answers

    How do you calculate gross monthly income for someone paid biweekly?

    <p>Multiply by 26 and divide by 12</p> Signup and view all the answers

    The front-end ratio in mortgage qualification measures:

    <p>Housing expenses to income</p> Signup and view all the answers

    LTV stands for:

    <p>Loan-to-Value</p> Signup and view all the answers

    The back-end ratio includes:

    <p>Housing expenses plus other credit obligations</p> Signup and view all the answers

    Which income source cannot be used for qualification if it will discontinue within 3 years?

    <p>Commission income</p> Signup and view all the answers

    What documentation is typically required to verify income for mortgage qualification?

    <p>12-months or 24-months bank statements</p> Signup and view all the answers

    What does the acronym VOE stand for in mortgage lending?

    <p>Verification of Employment</p> Signup and view all the answers

    For someone paid biweekly, how is their gross monthly income calculated?

    <p>Multiply the biweekly pay by 26 pay periods and divide by 12 months</p> Signup and view all the answers

    What does the front-end ratio represent in mortgage qualification?

    <p>Housing expenses divided by gross monthly income</p> Signup and view all the answers

    What does the acronym LTV stand for in mortgage lending?

    <p>Loan-to-Value</p> Signup and view all the answers

    How is the back-end ratio calculated for mortgage qualification?

    <p>Housing expenses plus other credit obligations divided by gross monthly income</p> Signup and view all the answers

    Which of the following statements about verifying commission income is true?

    <p>Commission income can be verified using one year of tax returns</p> Signup and view all the answers

    What is the purpose of calculating the front-end ratio?

    <p>To measure the portion of income used for housing expenses</p> Signup and view all the answers

    Which of the following statements about self-employment is true?

    <p>A borrower with 25% or more ownership in a business is considered self-employed</p> Signup and view all the answers

    What is the minimum ownership percentage required for a borrower to be considered self-employed?

    <p>25%</p> Signup and view all the answers

    Which of the following is NOT a valid method for calculating annual income from commission?

    <p>Estimating based on the highest paycheck</p> Signup and view all the answers

    How is rental income for mortgage qualification typically calculated?

    <p>Using the property's potential rental value</p> Signup and view all the answers

    When considering bank statements as proof of income, what type of borrowers are typically targeted?

    <p>Borrowers likely running a cash-based business</p> Signup and view all the answers

    What does CLTV ratio represent in mortgage qualification?

    <p>The relationship between all loan balances and the property's value</p> Signup and view all the answers

    Why is a compensating factor important in mortgage qualification?

    <p>To offset a high LTV</p> Signup and view all the answers

    How is monthly income calculated for someone paid on a weekly basis?

    <p>From their weekly pay amount</p> Signup and view all the answers

    How can a borrower use income from notes receivable for mortgage qualification?

    <p>By providing a copy of the endorsed and binding note and proof of 12 months of payments</p> Signup and view all the answers

    What documentation is needed to use interest and dividends as income for mortgage qualification?

    <p>Tax returns or account statements showing a 2-year history</p> Signup and view all the answers

    What is not acceptable as rental income documentation for mortgage qualification?

    <p>Income from roommates and boarders</p> Signup and view all the answers

    What is required for a self-employed borrower to use their income for mortgage qualification?

    <p>A two-year full tax return</p> Signup and view all the answers

    What can some loan programs use as proof of income?

    <p>Bank statements</p> Signup and view all the answers

    What is required for a borrower to use income from notes receivable for mortgage qualification?

    <p>The borrower must provide a promissory note</p> Signup and view all the answers

    To qualify for a mortgage, what is needed for the borrower to use interest and dividends as income?

    <p>The borrower must provide tax returns and account statements</p> Signup and view all the answers

    Which of the following is NOT an acceptable form of rental income documentation for mortgage qualification?

    <p>A letter from the borrower's friend confirming rental income</p> Signup and view all the answers

    What is a requirement for a self-employed borrower to use their income for mortgage qualification?

    <p>The borrower must provide two years of tax returns</p> Signup and view all the answers

    Under what condition can bank statements be used as proof of income for loan programs?

    <p>If the bank statements show consistent deposits and cash flow</p> Signup and view all the answers

    What documentation is required to use income from notes receivable for mortgage qualification?

    <p>A copy of the note showing the amount, term, and income stream</p> Signup and view all the answers

    What is required to include interest and dividends as income for mortgage qualification?

    <p>Tax returns for the most recent two years</p> Signup and view all the answers

    How is rental income for mortgage qualification typically calculated?

    <p>Using the borrower's Schedule E of the Form 1040</p> Signup and view all the answers

    What is a requirement for a self-employed borrower to use their income for mortgage qualification?

    <p>Providing tax returns for the most recent two years</p> Signup and view all the answers

    Under what condition can bank statements be used as proof of income for a mortgage loan?

    <p>If the borrower is likely running a cash-based business</p> Signup and view all the answers

    For a borrower to use income from notes receivable for mortgage qualification, what documentation must be provided?

    <p>A copy of the note and 12 months of payment proof</p> Signup and view all the answers

    Which of the following is NOT acceptable documentation for using interest and dividends as qualifying income?

    <p>A written estimate of future earnings from investments</p> Signup and view all the answers

    Which of the following is acceptable documentation for using rental income to qualify for a mortgage?

    <p>Both B and C are acceptable rental income documentation</p> Signup and view all the answers

    For a self-employed borrower to use their income to qualify for a mortgage, what is required?

    <p>A two-year history of personal tax returns</p> Signup and view all the answers

    How can a borrower use income from notes receivable for mortgage qualification?

    <p>The borrower must provide the original note and evidence of receipt of payments for the past 12 months</p> Signup and view all the answers

    Under what condition can bank statements be used as acceptable proof of income for mortgage qualification?

    <p>When there is a consistent monthly income stream deposited</p> Signup and view all the answers

    What documentation is needed to use interest and dividends as income for mortgage qualification?

    <p>The borrower must provide the last 2 years' tax returns showing a consistent history of interest and dividend income</p> Signup and view all the answers

    What is required for a self-employed borrower to use their income for mortgage qualification?

    <p>The borrower must provide at least 2 years of personal and business tax returns</p> Signup and view all the answers

    What type of borrowers are typically targeted when using bank statements as proof of income?

    <p>Self-employed borrowers without traditional employment documentation</p> Signup and view all the answers

    Which income source cannot be used for qualification if it will discontinue within 3 years?

    <p>Retirement or social security income</p> Signup and view all the answers

    To use income from notes receivable for mortgage qualification, a borrower must provide:

    <p>Both a copy of the promissory note and proof of receipt of payments for the past 12 months</p> Signup and view all the answers

    For interest and dividends to be considered as income, what is required?

    <p>Both proof of ownership and two years of consistent receipt</p> Signup and view all the answers

    Which of the following is NOT acceptable as rental income documentation?

    <p>Borrower's self-prepared rental income schedule</p> Signup and view all the answers

    A self-employed borrower must provide what to use their income for mortgage qualification?

    <p>Two of the three: tax returns, profit and loss statement, or business bank statements</p> Signup and view all the answers

    What is a requirement for using bank statements as proof of income?

    <p>The borrower's deposits must show a consistent source</p> Signup and view all the answers

    What documentation is required to use income from notes receivable for mortgage qualification?

    <p>Copies of the notes and evidence of regular payments</p> Signup and view all the answers

    What is required to include interest and dividends as income for mortgage qualification?

    <p>Two years of tax returns showing the income</p> Signup and view all the answers

    Which of the following is NOT acceptable as rental income documentation for mortgage qualification?

    <p>A note from the property manager</p> Signup and view all the answers

    What is required for a self-employed borrower to use their income for mortgage qualification?

    <p>Two years of personal tax returns</p> Signup and view all the answers

    Which of the following loan programs can use bank statements as proof of income?

    <p>Jumbo loans</p> Signup and view all the answers

    What is the ownership threshold for a borrower to be considered self-employed?

    <p>25%</p> Signup and view all the answers

    How can a borrower use income from notes receivable for mortgage qualification?

    <p>Provide copies of the notes and evidence of regular payments</p> Signup and view all the answers

    What is the purpose of the front-end ratio in mortgage underwriting?

    <p>To measure the portion of income used for housing expenses</p> Signup and view all the answers

    Which income source cannot be used for qualification if it will discontinue within 3 years?

    <p>Alimony or child support</p> Signup and view all the answers

    What is the best way to calculate annual income from commission?

    <p>Multiply by 52 and divide by 12</p> Signup and view all the answers

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