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% (B)</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 (C)</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 (C)</p> Signup and view all the answers

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

<p>25% or more (B)</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 (B)</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 (A)</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 (D)</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 (D)</p> Signup and view all the answers

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

<p>25% (A)</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 (C)</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 (C)</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 (A)</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 (D)</p> Signup and view all the answers

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

<p>Income from roommates (C)</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 (C)</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 (B)</p> Signup and view all the answers

What does VOE stand for in mortgage processing?

<p>Verification of Employment (A)</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 (B)</p> Signup and view all the answers

The front-end ratio in mortgage qualification measures:

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

LTV stands for:

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

The back-end ratio includes:

<p>Housing expenses plus other credit obligations (C)</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 (A)</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 (D)</p> Signup and view all the answers

What does the acronym VOE stand for in mortgage lending?

<p>Verification of Employment (C)</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 (C)</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 (D)</p> Signup and view all the answers

What does the acronym LTV stand for in mortgage lending?

<p>Loan-to-Value (D)</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 (D)</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 (D)</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 (B)</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 (B)</p> Signup and view all the answers

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

<p>25% (A)</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 (D)</p> Signup and view all the answers

How is rental income for mortgage qualification typically calculated?

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

Why is a compensating factor important in mortgage qualification?

<p>To offset a high LTV (C)</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 (A)</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 (C)</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 (A)</p> Signup and view all the answers

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

<p>Income from roommates and boarders (B)</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 (D)</p> Signup and view all the answers

What can some loan programs use as proof of income?

<p>Bank statements (C)</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 (B)</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 (A)</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 (A)</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 (C)</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 (D)</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 (D)</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 (B)</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 (D)</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 (B)</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 (B)</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 (D)</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 (D)</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 (C)</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 (C)</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 (C)</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 (D)</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 (A)</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 (B)</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 (D)</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 (D)</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 (A)</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 (C)</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 (B)</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 (A)</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 (A)</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 (D)</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 (A)</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 (C)</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 (B)</p> Signup and view all the answers

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

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

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

<p>25% (C)</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 (D)</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 (C)</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 (C)</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 (A)</p> Signup and view all the answers

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