Under Fannie Mae's Selling Guide, each loan below is a DU loan casefile with an Approve/Eligible recommendation. Which one meets the eligibility criteria for a desktop appraisal?
Correct Answer
D) A purchase of a one-unit principal residence at an 85% LTV ratio
Fannie Mae's desktop option requires a one-unit property, a principal residence, a purchase transaction, an LTV ratio of 90% or less and an Approve/Eligible DU recommendation; the 85% LTV principal-residence purchase meets all of them. The refinance fails because all refinances are ineligible, the condo purchase fails because condo units are ineligible, and the second-home purchase fails because second homes are ineligible.
Why This Is the Correct Answer
Option D is correct because a purchase of a one-unit principal residence at an 85% LTV ratio with an Approve/Eligible recommendation satisfies every listed desktop criterion. The 85% LTV ratio is within the 90% ceiling, and the property type, occupancy and transaction type all match the eligible list.
Why the Other Options Are Wrong
Option A: A limited cash-out refinance of a one-unit principal residence at a 70% LTV ratio
Option A fails because it is a limited cash-out refinance, and Fannie Mae lists all refinances as ineligible for a desktop appraisal. The low 70% LTV ratio does not cure the transaction-type problem.
Option B: A purchase of a condominium unit as a principal residence at an 80% LTV ratio
Option B fails because the subject is a condominium unit, and condo and co-op units are on the desktop ineligible list. Being a principal residence purchase at 80% LTV does not override the property-type exclusion.
Option C: A purchase of a one-unit second home at a 75% LTV ratio
Option C fails because the subject is a second home, and second homes and investment properties are ineligible for a desktop appraisal. The desktop option is limited to principal residences.
Desktop = One, Own, Buy, 90
One unit, owner-occupied as a principal residence, a purchase (buy), and an LTV ratio of 90% or less, plus an Approve/Eligible finding.
How to use: Use this checklist to screen each answer choice against the desktop eligibility criteria one at a time.
Exam Tip
On eligibility questions, eliminate choices by the transaction type and occupancy first; refinances and second homes drop out of the desktop option quickly.
Common Mistakes to Avoid
- -Assuming a low LTV ratio makes a refinance eligible for a desktop appraisal
- -Applying hybrid eligibility, which includes condos and second homes, to the desktop option
- -Treating condo units as one-unit properties eligible for a desktop appraisal
Concept Deep Dive
Analysis
This question tests Fannie Mae's desktop appraisal eligibility screen, which is narrower than the hybrid or value acceptance screens. Check each loan against the five criteria: one-unit property, principal residence, purchase, LTV ratio of 90% or less and an Approve/Eligible recommendation. Only a loan that clears all five qualifies.
Background Knowledge
Fannie Mae's Desktop Underwriter offers a desktop appraisal, reported on Form 1004 Desktop, for certain loan casefiles. Because the appraiser does not personally inspect the subject or comparables, the program limits eligibility to lower-risk purchase transactions of one-unit principal residences with moderate LTV ratios.
Real-World Application
A first-time buyer is purchasing a detached single-family home as a principal residence with 10% down. DU returns Approve/Eligible and presents a desktop appraisal option, which the lender may choose instead of a hybrid or traditional appraisal.
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