During the underwriting process, what does the term 'seasoning' refer to?
Correct Answer
B) The length of time funds have been in the borrower's accounts
Seasoning refers to the length of time funds have been in a borrower's accounts. Underwriters look for seasoned funds to ensure down payment and closing cost funds are legitimate and not recently borrowed, which would affect the borrower's true debt position.
Why This Is the Correct Answer
Seasoning refers to the length of time funds have been in a borrower's accounts. Underwriters look for seasoned funds to ensure down payment and closing cost funds are legitimate and not recently borrowed, which would affect the borrower's true debt position.
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
An interest-only mortgage has a rate adjustment cap of 2% per adjustment period and a lifetime cap of 6%. If the initial rate was 4% and the index has increased significantly, what is the maximum rate possible at the first adjustment?
Next Question
A borrower is purchasing a duplex in San Francisco for $1,400,000, planning to live in one unit and rent the other. The loan amount is $1,120,000. Given that the 2024 conforming loan limit for high-cost areas in San Francisco County is $1,149,825, how should this loan be classified?