SC Residential Mortgage Underwriting
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1. In residential mortgage underwriting, what is the primary purpose of
the underwriting process?
A. To market mortgage products to consumers
B. To determine whether the borrower and property meet lending
requirements
C. To establish real estate commission rates
D. To negotiate home purchase contracts
B. To determine whether the borrower and property meet lending
requirements
Rationale: Mortgage underwriting evaluates the borrower's
creditworthiness, repayment ability, assets, and collateral to determine
whether the loan presents an acceptable level of risk to the lender.
2. Which of the following is commonly considered one of the “Four Cs” of
underwriting?
A. Construction
,B. Capacity
C. Closing Costs
D. Compliance
B. Capacity
Rationale: Capacity refers to the borrower’s ability to repay the loan and is
a fundamental underwriting factor alongside credit, capital, and collateral.
3. A borrower’s debt-to-income ratio primarily measures:
A. Property appreciation potential
B. Home equity growth
C. Monthly debt obligations compared to income
D. Credit score trends
C. Monthly debt obligations compared to income
Rationale: The debt-to-income ratio compares monthly debt payments to
gross monthly income and helps determine repayment ability.
4. Which document is commonly used to collect borrower information for
a residential mortgage application?
A. HUD-1 Settlement Statement
B. Form W-2C
C. Uniform Residential Loan Application (URLA)
D. Form 1098
C. Uniform Residential Loan Application (URLA)
Rationale: The URLA, also known as Form 1003, is the standard residential
mortgage application used throughout the industry.
5. What is the primary purpose of verifying employment during
underwriting?
A. To determine property value
,B. To confirm stable and sufficient income
C. To establish loan servicing rights
D. To calculate escrow shortages
B. To confirm stable and sufficient income
Rationale: Employment verification helps confirm that the borrower has
reliable income to support mortgage repayment obligations.
6. Which factor generally lowers lender risk the most?
A. Higher LTV ratio
B. Larger down payment
C. Higher interest rate
D. Longer loan term
B. Larger down payment
Rationale: A larger down payment reduces the loan-to-value ratio and
increases borrower equity, lowering lender risk.
7. What does LTV stand for?
A. Lending Transaction Verification
B. Loan Transfer Value
C. Loan-to-Value
D. Liability-to-Valuation
C. Loan-to-Value
Rationale: LTV measures the relationship between the mortgage amount
and the property's value or purchase price.
8. A borrower purchasing a $300,000 home with a $60,000 down
payment will have an approximate LTV of:
A. 60%
B. 70%
, C. 80%
D. 90%
C. 80%
Rationale: The loan amount is $240,000. Dividing $240,000 by $300,000
equals 80%.
9. What is the underwriter primarily evaluating when reviewing a credit
report?
A. Property zoning restrictions
B. Borrower willingness to repay obligations
C. Home inspection results
D. Escrow balances
B. Borrower willingness to repay obligations
Rationale: Credit history reflects the borrower’s past repayment behavior
and overall creditworthiness.
10. Which credit event is generally viewed as a significant underwriting
concern?
A. Long employment history
B. High savings balance
C. Recent foreclosure
D. Owner occupancy
C. Recent foreclosure
Rationale: A recent foreclosure indicates substantial credit risk and may
affect eligibility for mortgage financing.
11. What is the purpose of an appraisal in mortgage underwriting?
A. To verify borrower income
B. To establish market value of the property
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationale 2026 Q&A| Instant Download
1. In residential mortgage underwriting, what is the primary purpose of
the underwriting process?
A. To market mortgage products to consumers
B. To determine whether the borrower and property meet lending
requirements
C. To establish real estate commission rates
D. To negotiate home purchase contracts
B. To determine whether the borrower and property meet lending
requirements
Rationale: Mortgage underwriting evaluates the borrower's
creditworthiness, repayment ability, assets, and collateral to determine
whether the loan presents an acceptable level of risk to the lender.
2. Which of the following is commonly considered one of the “Four Cs” of
underwriting?
A. Construction
,B. Capacity
C. Closing Costs
D. Compliance
B. Capacity
Rationale: Capacity refers to the borrower’s ability to repay the loan and is
a fundamental underwriting factor alongside credit, capital, and collateral.
3. A borrower’s debt-to-income ratio primarily measures:
A. Property appreciation potential
B. Home equity growth
C. Monthly debt obligations compared to income
D. Credit score trends
C. Monthly debt obligations compared to income
Rationale: The debt-to-income ratio compares monthly debt payments to
gross monthly income and helps determine repayment ability.
4. Which document is commonly used to collect borrower information for
a residential mortgage application?
A. HUD-1 Settlement Statement
B. Form W-2C
C. Uniform Residential Loan Application (URLA)
D. Form 1098
C. Uniform Residential Loan Application (URLA)
Rationale: The URLA, also known as Form 1003, is the standard residential
mortgage application used throughout the industry.
5. What is the primary purpose of verifying employment during
underwriting?
A. To determine property value
,B. To confirm stable and sufficient income
C. To establish loan servicing rights
D. To calculate escrow shortages
B. To confirm stable and sufficient income
Rationale: Employment verification helps confirm that the borrower has
reliable income to support mortgage repayment obligations.
6. Which factor generally lowers lender risk the most?
A. Higher LTV ratio
B. Larger down payment
C. Higher interest rate
D. Longer loan term
B. Larger down payment
Rationale: A larger down payment reduces the loan-to-value ratio and
increases borrower equity, lowering lender risk.
7. What does LTV stand for?
A. Lending Transaction Verification
B. Loan Transfer Value
C. Loan-to-Value
D. Liability-to-Valuation
C. Loan-to-Value
Rationale: LTV measures the relationship between the mortgage amount
and the property's value or purchase price.
8. A borrower purchasing a $300,000 home with a $60,000 down
payment will have an approximate LTV of:
A. 60%
B. 70%
, C. 80%
D. 90%
C. 80%
Rationale: The loan amount is $240,000. Dividing $240,000 by $300,000
equals 80%.
9. What is the underwriter primarily evaluating when reviewing a credit
report?
A. Property zoning restrictions
B. Borrower willingness to repay obligations
C. Home inspection results
D. Escrow balances
B. Borrower willingness to repay obligations
Rationale: Credit history reflects the borrower’s past repayment behavior
and overall creditworthiness.
10. Which credit event is generally viewed as a significant underwriting
concern?
A. Long employment history
B. High savings balance
C. Recent foreclosure
D. Owner occupancy
C. Recent foreclosure
Rationale: A recent foreclosure indicates substantial credit risk and may
affect eligibility for mortgage financing.
11. What is the purpose of an appraisal in mortgage underwriting?
A. To verify borrower income
B. To establish market value of the property
