Chapter 17 — Self-Check Quiz

Twenty-eight questions. Multiple choice and short answer, written in the style of the SAFE MLO test where the material is exam-relevant. Work them without the chapter open, then check the key.

All dollar figures are constructed teaching values, and every funding fee rate, per-square-foot factor, county limit, and USDA figure is illustrative — the current ones are published by the VA and USDA. Answering these correctly means getting the structure right, not memorizing a number that will be revised.

1. The Department of Veterans Affairs' role in a VA-guaranteed loan is best described as:

A. lending money directly to eligible veterans B. insuring one hundred percent of the loan against loss C. guaranteeing a portion of the lender's exposure to loss D. purchasing the loan from the lender after closing

2. Which of the following appears on a VA borrower's monthly mortgage payment?

A. an annual mortgage insurance premium, collected monthly B. a monthly VA guaranty premium C. the VA funding fee, shown as a separate monthly line D. none of the above

3. A Certificate of Eligibility establishes:

A. that the applicant is approved for a loan B. that the applicant is eligible for the benefit, and how much entitlement is available C. the maximum loan amount available to the applicant D. the representative credit score the applicant must meet

4. Basic entitlement has long been stated as:

A. \$25,000 B. \$36,000 C. \$104,250 D. twenty-five percent of the loan amount, with no fixed dollar figure

5. A veteran with full entitlement is subject to what VA loan limit?

A. the conforming loan limit for the county B. the FHA loan limit for the county C. four times basic entitlement D. none — the VA guarantees twenty-five percent regardless of the loan amount

6. (Short answer, calculation.) Assume an applicable county limit of \$766,550. A veteran has one outstanding VA loan of \$500,000. Compute remaining entitlement and the maximum zero-down loan, and verify with the shortcut.

7. The VA funding fee may be:

A. paid in cash at closing only B. financed, but only to the extent the loan stays at or below the purchase price C. financed, and the resulting loan amount may exceed the purchase price D. waived at the lender's discretion for well-qualified borrowers

8. Which of the following is not a funding fee exemption category?

A. a veteran receiving VA compensation for a service-connected disability B. a surviving spouse of a veteran who died from a service-connected disability C. a first-time homebuyer using the benefit for the first time D. a veteran who would be entitled to compensation but for receiving retirement pay

9. Residual income is best described as:

A. a compensating factor available to VA underwriters B. a required minimum dollar amount remaining after specified deductions C. gross monthly income less the proposed mortgage payment D. an optional alternative to computing debt-to-income

10. The VA's published residual income minimums vary by:

A. credit score and loan-to-value B. geographic region and household size C. branch of service and length of service D. property type and occupancy

11. (Short answer.) Name the four categories of subtraction between gross monthly income and residual income, in the order they appear on the worksheet.

12. Tidewater occurs:

A. after the Notice of Value issues, as a formal appeal B. before the appraisal report is finalized, when the value appears likely to come in below contract C. when the borrower disputes a condition on the appraiser's report D. when the VA reassigns an appraisal to a different appraiser

13. During a Tidewater window, the party usually best positioned to supply useful comparable sales is:

A. the borrower B. the loan officer C. the listing agent D. the underwriter

14. The VA escape clause permits a veteran to:

A. cancel the loan within three business days after closing B. withdraw from the purchase and recover the deposit if reasonable value comes in below the contract price C. compel the seller to reduce the price to the appraised value D. compel the VA to reconsider the appraiser's opinion of value

15. Under VA rules, an IRRRL generally does not require:

A. a prior occupancy certification B. a funding fee C. an appraisal, income documentation, or a credit underwriting package D. an existing VA loan to refinance

16. A veteran's VA loan is assumed, with VA approval, by a buyer who is not a veteran. The seller's entitlement:

A. is restored at the assumption closing B. remains charged until the loan is paid in full C. is reduced by half D. transfers to the assuming buyer

17. Restoration of entitlement where the veteran pays the VA loan in full but keeps the property is available:

A. never B. once C. twice D. an unlimited number of times

18. (Short answer.) Name the three gates a USDA guaranteed loan must pass.

19. USDA's adjusted household income counts:

A. only the income of the borrowers on the loan B. the income of all adult household members, whether or not they are on the loan C. only the income actually used to qualify the borrowers D. household income less all housing expenses

20. USDA's household income limit functions as:

A. a floor — the household must earn at least the limit B. a ceiling — a household above the limit is ineligible C. a benchmark that may be exceeded with documented compensating factors D. a guideline that varies by lender overlay

21. USDA's annual fee is:

A. mortgage insurance subject to Homeowners Protection Act cancellation B. a one-time charge collected at closing C. a percentage of the average scheduled unpaid principal balance, collected in monthly installments D. charged only on loans above ninety percent loan-to-value

22. (Short answer.) A USDA file is cleared to close by the lender on a Tuesday. What still stands between it and a Friday closing, and who controls it?

23. Which statement about VA credit standards is accurate?

A. The VA requires a minimum representative score of 620. B. The VA requires a minimum score of 580 for a zero-down loan. C. The VA publishes no minimum credit score; lenders impose overlays. D. The VA defers entirely to the automated underwriting recommendation.

24. (Short answer.) A borrower says, "I was only in the Guard, so I don't think that counts." What do you do, and — more importantly — what do you not do?

25. A veteran pays the funding fee at closing. Four months later, a disability rating is granted with an effective date preceding the closing date. The likely result is:

A. nothing — the fee is final as of closing B. a refund of the funding fee may be available C. the loan must be refinanced to remove the fee D. the lender is required to credit the borrower at its own expense

26. (Short answer, calculation.) Household of three. Gross monthly income \$5,200.00; federal income tax \$430.00; state income tax \$155.00; Social Security and Medicare at 7.65%; proposed PITI \$1,510.00; 1,340 square feet at an illustrative \$0.14 per square foot; all other monthly obligations \$488.00. Compute residual income, residual income per person, and the back-end ratio.

27. Which program covered in this book can deny an applicant for earning too much?

A. VA B. FHA C. USDA guaranteed D. conventional at ninety-five percent

28. On the Linden Street VA counterfactual, the loan is \$27,527.50 larger than the conventional loan that actually closed, and the payment is \$65.18 smaller. The single largest reason is:

A. the 0.250% lower interest rate B. the absence of monthly mortgage insurance C. the financed funding fee D. the higher loan-to-value ratio