When a borrower's bank statements show overdraft fees, what is the primary underwriting concern?
Correct Answer
B) Overdrafts indicate poor financial management and cash flow issues
Frequent overdraft fees are a red flag indicating poor financial management, inadequate cash flow, or living paycheck to paycheck. This pattern suggests the borrower may struggle with mortgage payments and represents increased credit risk that underwriters must evaluate carefully.
Why This Is the Correct Answer
Frequent overdraft fees are a red flag indicating poor financial management, inadequate cash flow, or living paycheck to paycheck. This pattern suggests the borrower may struggle with mortgage payments and represents increased credit risk that underwriters must evaluate carefully.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?
An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer:
An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
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Previous Question
A construction-to-permanent loan differs from a traditional construction loan in that:
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A borrower qualifies for multiple loan products. The loan originator presents a 30-year fixed rate at 6.5% with $2,000 in points, a 30-year fixed rate at 7.0% with $500 in points, and a 5/1 ARM at 5.5% with $1,500 in points. Which category does the 5/1 ARM represent?