An FHA construction borrower owns the lot free and clear. Which statement is most accurate?
Correct Answer
B) The land value may affect the transaction, but all applicable FHA eligibility and underwriting requirements still must be met
Why this is correct: For an FHA construction loan, the borrower's free-and-clear lot ownership is a factor that may provide equity and affect the loan-to-value calculation, but all applicable FHA eligibility and underwriting requirements still must be met. This includes property standards (e.g., appraisal, construction plans), borrower qualifications (e.g., credit, debt-to-income ratios), and program-specific rules. Why the other choices are wrong: The option "Lot ownership automatically satisfies every FHA underwriting requirement" is incorrect because it overstates the impact; lot ownership is just one element among many requirements. The option "No appraisal or construction documentation is needed" is wrong; FHA construction loans require a property appraisal and approved construction documentation. The option "The borrower may select any loan amount without program limits" is incorrect; FHA loans have statutory loan limits based on county and property type. Exam tip: Lot ownership is a plus, but never waives core FHA requirements for the borrower, property, or loan terms.
Why This Is the Correct Answer
Why this is correct: For an FHA construction loan, the borrower's free-and-clear lot ownership is a factor that may provide equity and affect the loan-to-value calculation, but all applicable FHA eligibility and underwriting requirements still must be met. This includes property standards (e.g., appraisal, construction plans), borrower qualifications (e.g., credit, debt-to-income ratios), and program-specific rules. Why the other choices are wrong: The option "Lot ownership automatically satisfies every FHA underwriting requirement" is incorrect because it overstates the impact; lot ownership is just one element among many requirements. The option "No appraisal or construction documentation is needed" is wrong; FHA construction loans require a property appraisal and approved construction documentation. The option "The borrower may select any loan amount without program limits" is incorrect; FHA loans have statutory loan limits based on county and property type. Exam tip: Lot ownership is a plus, but never waives core FHA requirements for the borrower, property, or loan terms.
More Origination Questions
In a training scenario, the consumer locks the interest rate after the initial disclosure package. What action best follows the rule?
A mortgage file is paused during a risk-control review because of AIR Appraiser Independence. Which answer should explain the required action to the team?
A team member asks about Good Faith Dealing in a compliance desk review while trying to avoid a shortcut that would misapply the rule. Which response should the supervisor use?
A disclosure specialist is resolving Income Calculation Methods during an internal audit sample. Which action best fits the rule?
In a closing-readiness check, a quality-control reviewer sees facts tied to Self Employed Income Calculation. What should the file reflect?
During a disclosure desk review, a policy analyst encounters an Income Calculation Self Employed issue. Which response should decide how the file should be documented?
During a training quiz scenario, the loan team encounters an Income Calculation issue. Which response should resolve the issue before the file moves forward?
Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A team member asks about ATR QM Rule Documentation in a consumer complaint triage while trying to identify which rule controls the file. Which response should a licensing coordinator use?
Next Question
During intake, a borrower asks which upfront charge can be collected before intent to proceed. What is the best compliant response?