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NAMP CMLP study materials
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NAMP CMLP: Credit, Income, and Underwriting Analysis

NAMP CMLP · Work through your exam, one topic at a time.

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Credit, Income, and Underwriting Analysis

Domain 4: Credit, Income, and Underwriting Analysis

This domain tests whether a file meets credit, capacity, and asset requirements: credit report review, DTI, AUS findings, income calculation by source, asset verification, and documentation standards. The exam rewards precise treatment of variable income and liabilities.

Credit

  • Review all three bureaus; scores drive pricing and program eligibility. Look for undisclosed debts, disputes, collections, judgments, and recent inquiries.
  • Derogatory credit requires explanation; bankruptcies and foreclosures have waiting periods that vary by program.
  • Non-traditional credit may be allowed on some programs when no tradelines exist.
  • Liabilities include installment, revolving, lease, child support, and co-signed debt, even if the other party pays.

Income

  • W-2: base salary documented by paystubs, W-2s, and a verification of employment; overtime and bonus averaged over 2 years if stable.
  • Self-employed: use Schedule C net profit plus non-cash deductions such as depreciation, then average 2 years; declining income may require the lower year.
  • Rental income: 75% of gross rent may be used for conventional; subtract the full mortgage payment.
  • Other: Social Security, pension, VA benefits, and disability may be grossed up only if non-taxable and documented.

DTI and AUS

  • Front-end DTI = housing payment / gross monthly income; back-end DTI includes all debt.
  • Fannie Mae DU and Freddie Mac LPA issue findings; manual underwriting requires compensating factors.
  • Assets must be sourced; large deposits need explanation; gift funds need a gift letter and transfer evidence.

Worked example

A self-employed borrower shows Schedule C net profit of $60,000 in year 1 and $70,000 in year 2, with $10,000 depreciation each year. Qualifying income is ($60,000 + $10,000 + $70,000 + $10,000) ÷ 24 = $6,250 per month. If the housing payment is $2,000 and other debts are $500, back-end DTI = $2,500 ÷ $6,250 = 40%.

Traps

  • Using gross receipts instead of net profit.
  • Ignoring a co-signed loan.
  • Averaging a declining bonus without justification.
  • Treating a gift as an asset without documentation.