During the application process, a borrower mentions they are expecting a large bonus payment next month that would significantly improve their debt-to-income ratio. The borrower asks if they should wait to apply until after receiving the bonus. What should the MLO advise?
Correct Answer
C) Explain the documentation requirements for bonus income and let the borrower decide the timing
MLOs must provide accurate information about documentation requirements without steering borrowers toward specific timing decisions. Bonus income typically requires 2-year history and employer verification for underwriting purposes. The MLO should explain these requirements and let the borrower make an informed decision about timing, rather than advising on strategy or using unverified future income projections.
Why This Is the Correct Answer
MLOs must provide accurate information about documentation requirements without steering borrowers toward specific timing decisions. Bonus income typically requires 2-year history and employer verification for underwriting purposes. The MLO should explain these requirements and let the borrower make an informed decision about timing, rather than advising on strategy or using unverified future income projections.
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Previous Question
A borrower with a 15% down payment on a conventional loan requests to pay their PMI premium annually rather than monthly. The lender agrees but requires the borrower to establish an escrow account. What is the primary regulatory concern with this arrangement?
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