Loan Officer Practice Exam

Which of the following is a document typically required during the mortgage application process?

1. Credit report

2. Business plan

3. Tax return from previous five years

4. Personal letter of recommendation

The correct answer is: Credit report

A credit report is a crucial document required during the mortgage application process because it provides lenders with a detailed overview of the borrower’s credit history and current creditworthiness. It includes information on the borrower’s credit accounts, payment history, and any outstanding debts, which helps lenders assess the risk of lending money for a mortgage. A strong credit report can lead to better loan terms, while a poor one may result in higher interest rates or loan denial. While a tax return can be important, especially in verifying income, it is typically the most recent year’s return that is required rather than five years of returns. A business plan is generally not relevant unless the applicant is self-employed and the lender specifically requests it to understand the business's financial stability. A personal letter of recommendation is not a standard requirement in the mortgage application process; lenders rely primarily on documented financial information to make their lending decisions.