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Ch 11, Pre-Approval Through Loan Commitment

Terms in this set (51)

All of the following statements are correct regarding prequalifying a borrower, EXCEPT prequalifying borrowers:
is the same as pre-approval.
Underwriters look at the risk factors that are associated with a borrower applying for a loan. Of the following, which is NOT a risk factor?
Education level
Which of the following is TRUE about a standard title insurance policy?
The buyer is protected against all recorded matters.
Why is it important to pre-qualify a borrower?
It is important because the borrower's ability to repay a mortgage loan is important.
Which is NOT one of the "Three Cs" of credit that underwriters use when evaluating a borrower?
Competency
Before the loan funds, most lenders require buyers to have all of the following types of insurance policies, EXCEPT:
life insurance.
All of the following are typical prior to documents conditions, EXCEPT:
obtaining life insurance.
The American Land Title Association (ALTA) forms are used almost universally throughout the nation. What are the two types of title insurance coverage?
standard and Extended
Which statement is INCORRECT regarding the pre-approval letter?
The pre-approval letter is provided by the listing agent.
There is a distinct relationship between borrower equity and loan default; therefore, the most important aspect of the underwriting process is evaluating the:
loan-to-value ratio.
The liability coverage section of a homeowner's policy deals with:
personal liability coverage.
Lenders review a borrower's credit report because it can give a lender an idea about the borrower's:
willingness to repay the debt.
What is the first step in getting approved for a mortgage loan?
Fill out a loan application
During the pre-approval process of a potential borrower, all of the following are evaluated EXCEPT the borrower's:
diversions.
Which statement is INCORRECT regarding the pre-approval letter?
The pre-approval letter is provided by the listing agent.
The term repayment ability refers to the:
borrower's financial ability to repay the loan.
The borrower's financial ability to repay a mortgage is the borrower's:
capacity.
The practice of analyzing the degree of risk involved in a real estate loan is called:
underwriting.
When reviewing the "Three Cs", underwriters review the property given as security for the loan, which is the:
collateral.
A property must be insured for floods if it is located in a Special Flood Hazard Area (SFHA) designated by the:
Federal Emergency Management Agency.
In addition, to the signed loan application, borrowers must provide all of the following, EXCEPT:
six months of bank account statements.
Evidence of title is the means by which the ownership of land is satisfactorily demonstrated within a given jurisdiction. Which is NOT one of the four kinds of evidence of title?
Verification of title
Before the actual loan processing can begin, borrowers must:
communicate their intention to proceed with the loan.
The term "funding" usually refers to the time the lender actually "funds" the loan. The funding of a loan will occur only after the:
lender's prior-to-funding conditions have been satisfied.
Which statement is CORRECT regarding flood insurance?
Flood insurance is a separate policy for an extra premium.
Evidence of title is the means by which the ownership of land is satisfactorily demonstrated within a given jurisdiction. Which is NOT one of the four kinds of evidence of title?
Verification of title
Before the actual loan processing can begin, borrowers must:
communicate their intention to proceed with the loan.
The term "funding" usually refers to the time the lender actually "funds" the loan. The funding of a loan will occur only after the:
lender's prior-to-funding conditions have been satisfied
What ratio do lenders use to measure a borrower's ability to repay a mortgage?
Debt-to-income ratio
The Ability-to-Repay Rule (ATR) has eight underwriting factors used to determine a borrower's ability to repay: Which of the following is NOT one of the factors to help assess a borrower's ability to repay?
Existing property address
The term repayment ability refers to the:
borrower's financial ability to repay the loan.
One of the risk factors associated with approving a real estate loan is the type and value of the collateral because if the buyer defaults:
the property is the lender's primary security for repayment of the loan
When reviewing the Verification of Income (VOE) for a borrower, lenders look for how may years of stable and continuing employment?
At least 2 years of employment with current employer
All of the statements regarding mortgage insurance are correct, EXCEPT:
Mortgage insurance coverage for the bottom part of a residential loan.
The goal of title insurance companies is to insure good title to the property. A saleable title that is reasonably free from risk of litigation over possible defects is called:
marketable title.
What is a form of risk management because it transfers the risk of a loss, from one entity to another in exchange for money?
Insurance
All of the following statements are correct regarding prequalifying a borrower, EXCEPT prequalifying borrowers:
is the same as pre-approval.
There is a distinct relationship between borrower equity and loan default; therefore, the most important aspect of the underwriting process is evaluating the:
oan-to-value ratio.
In addition, to the signed loan application, borrowers must provide all of the following, EXCEPT:
six months of bank account statements.
All of the statements regarding mortgage insurance are correct, EXCEPT:
Mortgage insurance coverage for the bottom part of a residential loan.
The goal of title insurance companies is to insure good title to the property. A saleable title that is reasonably free from risk of litigation over possible defects is called:
marketable title.
What is a form of risk management because it transfers the risk of a loss, from one entity to another in exchange for money?
Insurance
The loan application, verifications, credit report, and information on the property are documents that the loan processor puts into a:
loan package.
There is a distinct relationship between borrower equity and loan default; therefore, the most important aspect of the underwriting process is evaluating the:
loan-to-value ratio.
Homeowners insurance covers the main residence and any attached additions. In an insurance policy, what does replacement value cover?
Replacement value replaces damaged property with new property of like kind and quality in the local market.
During the pre-qualification stage, a mortgage loan originator:
tries to match the borrower with suitable mortgage products.
The market value of a property is determined by:
an appraisal.
Homeowners insurance covers the main residence and any attached additions. In an insurance policy, what does replacement value cover?
Replacement value replaces damaged property with new property of like kind and quality in the local market.
If the homeowner allows the insurance to lapse or be cancelled, the lender will obtain:
These are all names for the insurance that a lender would obtain.
The liability coverage section of a homeowner's policy deals with:
personal liability coverage.
The term repayment ability refers to the:
borrower's financial ability to repay the loan.
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