When a borrower's bank statements show overdraft fees, what is the primary underwriting concern?
Correct Answer
A) 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
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
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:
A borrower requests that all loan communications be sent only to their workplace address because they are in the process of divorce and don't want their spouse to see mortgage-related documents. How should the MLO handle this request?
A borrower wants to compare an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. What is the MOST important disclosure the MLO must provide about the ARM?
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An MLO issues a pre-approval letter that states 'subject to satisfactory appraisal and final underwriting approval.' The borrower uses this letter to make an offer, but the appraisal comes in $15,000 below the purchase price. What is the lender's obligation?
A borrower's bank statement shows monthly service fees of $25 and overdraft fees totaling $150 over two months. How should the MLO address this in the loan evaluation?
How long is a typical pre-approval letter valid?
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An MLO issues a pre-approval letter valid for 90 days. On day 85, the borrower's credit score drops 40 points due to a new credit inquiry and increased credit utilization. What should the MLO do?
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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?