A borrower with a 580 credit score applies for an FHA loan with 3% down payment. What would be the underwriter's likely response?
Correct Answer
B) Require a higher down payment
FHA requires a minimum 3.5% down payment for borrowers with credit scores of 580 or higher. For credit scores between 500-579, FHA requires a 10% down payment. With a 580 credit score and only 3% down, the borrower would need to increase their down payment to 3.5% to meet FHA guidelines.
Why This Is the Correct Answer
FHA requires a minimum 3.5% down payment for borrowers with credit scores of 580 or higher. For credit scores between 500-579, FHA requires a 10% down payment. With a 580 credit score and only 3% down, the borrower would need to increase their down payment to 3.5% to meet FHA guidelines.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
People Also Study
Federal Mortgage-Related Laws
23% of exam
Mortgage Loan Origination Activities
25% of exam
Ethics, Fraud & Consumer Protection
17% of exam
Uniform State Test Content
12% of exam
Previous Question
A borrower has a 3/1 ARM with a 2/2/5 cap structure. If the current rate is 4.0% and the fully indexed rate at the next adjustment is 7.5%, what will the new rate be?
Next Question
Which of the following scenarios would typically qualify as a rate and term refinance rather than a cash-out refinance?