For an FHA construction-to-permanent transaction, which approach is appropriate when determining program eligibility?
Correct Answer
C) Apply the current FHA program requirements to the borrower, property, builder, construction, and permanent financing
Why this is correct: The correct answer is "Apply the current FHA program requirements to the borrower, property, builder, construction, and permanent financing." FHA construction-to-permanent loans are subject to specific FHA eligibility rules that cover all aspects of the transaction. This includes the borrower's credit and income, the property's eligibility and appraisal, the builder's qualifications and warranty, and the standards for both the construction draws and the permanent mortgage. These requirements must be met for the loan to be eligible for FHA insurance. Why the other choices are wrong: "Assume every conventional construction rule is identical" is wrong because FHA and conventional (non-government) construction programs have different rules, standards, and guidelines. "Ignore builder and property requirements because the loan will convert" is wrong because FHA requirements for builder approval and property standards are mandatory, regardless of the future conversion. "Treat land ownership as automatic FHA approval" is wrong because owning the land is just one factor; it does not waive other FHA requirements for the borrower, builder, or construction plans. Exam tip: For government loans (FHA, VA, USDA), always consult the specific program handbook (e.g., FHA Single Family Housing Policy Handbook) for current eligibility rules.
Why This Is the Correct Answer
Why this is correct: The correct answer is "Apply the current FHA program requirements to the borrower, property, builder, construction, and permanent financing." FHA construction-to-permanent loans are subject to specific FHA eligibility rules that cover all aspects of the transaction. This includes the borrower's credit and income, the property's eligibility and appraisal, the builder's qualifications and warranty, and the standards for both the construction draws and the permanent mortgage. These requirements must be met for the loan to be eligible for FHA insurance. Why the other choices are wrong: "Assume every conventional construction rule is identical" is wrong because FHA and conventional (non-government) construction programs have different rules, standards, and guidelines. "Ignore builder and property requirements because the loan will convert" is wrong because FHA requirements for builder approval and property standards are mandatory, regardless of the future conversion. "Treat land ownership as automatic FHA approval" is wrong because owning the land is just one factor; it does not waive other FHA requirements for the borrower, builder, or construction plans. Exam tip: For government loans (FHA, VA, USDA), always consult the specific program handbook (e.g., FHA Single Family Housing Policy Handbook) for current eligibility rules.
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 branch manager asks about a loan file because the borrower has provided enough information to trigger a TRID application. What should happen?
Next Question
A borrower-facing employee is unsure what to do when a late closing change occurs and the team must decide whether a new waiting period is required. What is the correct response?