A mortgage file is paused during a risk-control review because of Credit Reports and Scoring. Which answer should match the file facts to the correct rule?
Correct Answer
A) Include known debts in repayment analysis
Why this is correct: The governing concept for credit evaluation is that a borrower's complete debt picture must be used to assess repayment ability. This includes all known obligations, even those not listed on the primary credit report (e.g., debts verified through other documentation like child support or separate loan agreements). Including these known debts in the repayment analysis ensures an accurate Debt-to-Income (DTI) ratio and a sound underwriting decision. Why the other choices are wrong: Ignoring a recent inquiry because the borrower says no new account was opened is wrong because the lender must verify and consider all credit information, not rely solely on borrower statements. Calculating DTI before resolving known obligations shown outside the credit report is wrong because DTI must be calculated using the full, verified debt load. Using the lowest middle score from a different borrower to improve pricing is wrong because pricing must be based on the correct applicant's credit score; using another's score is fraudulent. Exam tip: For repayment analysis, "known debts" means all verified obligations, regardless of the source document.
Why This Is the Correct Answer
The correct response is "Include known debts in repayment analysis" because Credit evaluation uses verified credit, debts, history, and repayment ability.
Why the Other Options Are Wrong
Option B: Ignore a recent inquiry because the borrower says no new account was opened.
This choice is a tempting shortcut, but it conflicts with credit evaluation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Calculate DTI before resolving known obligations shown outside the credit report.
This choice is not the best answer because it applies the wrong file step for credit evaluation; the governing rule is tested by the correct option.
Option D: Use the lowest middle score from a different borrower to improve pricing.
This choice is not the best answer because it applies the wrong file step for credit evaluation; the governing rule is tested by the correct option.
Memory Technique
credit evaluation: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For credit evaluation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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