A mortgage file is paused during a lock-desk handoff because of FHA Seller Contribution Limits. Which answer should decide how the file should be documented?

Correct Answer

C) Check FHA occupancy and eligibility requirements

Why this is correct: The correct action is to "Check FHA occupancy and eligibility requirements." FHA loans are governed by HUD Handbook 4000.1, which sets strict rules. Seller contribution limits (how much a seller can pay toward the buyer's costs) are directly tied to the loan type, occupancy (primary residence vs. investment), and the borrower's eligibility (e.g., credit score, debt-to-income ratio). Resolving a seller contribution issue requires verifying these underlying eligibility factors first, as they establish the permissible limits. Why the other choices are wrong: The choice to "Apply a different loan-program rule without checking the file facts" is wrong because FHA rules are specific and must be applied based on the actual loan file details. The choice to "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because FHA's insurance requirements are mandatory, not optional based on preference. The choice to "Resolve the FHA Seller Contribution Limits issue with the quality-control exception that does not fit the facts" is wrong because applying an incorrect exception is a compliance failure; the correct fix is to apply the proper FHA rule. Exam tip: For FHA, always start with occupancy (must be primary residence for most borrowers) and eligibility. These are the gatekeepers for all other rules, including seller contributions.